Mario Marcel, Chile’s central bank governor, has backed the central bank digital currency (CBDC) by saying that it can help alleviate the challenges of “unconventional monetary policies” while providing additional flexibility.

Acknowledging Bitcoin’s disruptive potential and benefits over the legacy system, Marcel said: 

“Disruptive technologies in Finance or ‘FinTech’ are transforming the financial industry landscape, challenging traditional business models. These technologies have been able to address some gaps in the conventional financial industry that can be grouped into five categories: Access, Speed, Cost, Transparency, and Security.”

Marcel also argued that the new technology could be taken up by the banking system to mitigate the disruptive potential as well as leverage advantages of the distributed ledger technology (DLT). 

He also backed DLT and CBDC in “enhancing market efficiency” and noted that they could be particularly helpful for crisis management around the Zero Lower Bound. 

Marcel added that CBDCs could help central banks in giving out more intervention tools while reducing the risk of bank runs. Balance sheets on a transparent ledger can simplify unwinding of troublesome financial institutions and divestment of assets, he noted. 

But while Marcel agrees that CBDCs do not need a blockchain, he concluded: “Monetary policy channels in a world with CBDCs may be faster and more powerful.”

Central Bank Digital Currencies or CBDCs are expected to play a big role in the future of digital coinage as countries look to end dependency on the never-ending interest quagmire.

 

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