BIS: Central bank digital currencies will not supplant cash

Against the backdrop of central banks’ work on central bank digital currencies (CBDCs), the role of cash in payments is declining, but it remains a store of value. This opinion stated by Benoît Cœuré, head of BIS’s Innovation Hub.

“In the euro area, unlike Sweden or China, demand for banknotes remains high. People continue to stash money under mattresses,” he noted.

In his words, no one wants to force consumers to choose a payment method, as variety fuels innovation.

Cœuré added that CBDCs are simply the digital equivalent of banknotes and coins.

He believes that CBDCs do not necessarily have to be blockchain-based solutions. For example, the Chinese digital currency does not use the technology; the ECB has also considered a solution based on existing payment infrastructure, the BIS Innovation Hub head noted.

Cœuré thinks hybrid solutions are possible, with DLT technology used in relations between the central bank and commercial banks, while among individuals digital currency would spread through more traditional channels.

“We have no preconceived bias, but blockchain is, of course, one of the options,” he clarified.

Among the countries that are most advanced on CBDC, Cœuré named China, Sweden and Bahamas.

As noted, Deutsche Bank analysts have come to the conclusion that, in the long run, digital currencies will replace cash.

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