Fitch Ratings: “digital currencies of central banks will destroy the global monetary system”

Central bank digital currencies can wreak havoc on the global financial system by eliminating the need for banks and lending institutions, according to researchers at Fitch Ratings.

Analysts at Fitch Ratings believe that the consequences of the widespread introduction of state-owned cryptocurrencies can be extremely destructive for the entire banking infrastructure. This will lead to the fact that individuals and organizations will begin to transfer money into digital currencies of central banks and stop using the services of commercial banks.

Taking into account that banks and financial institutions will have a shortage of funds for lending, they will experience a shortage of liquidity, which will force them to raise interest rates on loans and deposits. In addition, the threat to cybersecurity will increase as more points of contact arise between central banks and the economy.

Fitch Ratings also highlighted the key benefits of central bank retail digital currencies. First of all, the use of such assets will speed up non-cash payments and make them cheaper, as well as expand the population’s access to banking services.

As the disadvantages of government stablecoins, researchers at Fitch Ratings indicated a lower level of confidentiality compared to cash. In addition, governments can limit the amount of digital currency for transactions and storage in users’ e-wallets.

Recently, many central banks have begun actively exploring the possibility of launching their own digital currency. In October, the Central Bank of the Bahamas launched the Sand Dollar, a digital version of the Bahamian dollar. The People’s Bank of China (PBOC) has tested the digital yuan multiple times and is close to launching, and the European Central Bank (ECB) plans to launch the digital euro in the next five years.

The Bank of Israel also decided to follow suit and began to explore the potential of the digital shekel. The US Federal Reserve (FRS) is taking a more cautious approach to this issue, but has expressed its readiness to test the digital dollar this year.

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