Hossein Nabilou, a researcher at the University of Luxembourg, examines the impact of the Central Bank digital currency (CBDC) issued by the central bank, and notes that the CBDC issued by the European Central Bank may violate the EU charter It catches the eye.
He focused on the potential problems of the European Central Bank through his research, the Central Bank Digital Currency: Preliminary Legal Considerations. First of all, we paid attention to how the banking function of currency exchange, which is similar to the money issued by the central bank, would attract the attention of the bank. It is because of the possibility of collapsing the monopoly and affecting the stability of the existing financial system.
The CBDC can be treated as a countermeasure against the increasing popularity of cryptography. Despite the general skepticism of cryptography and the failure of some Venezuelan oil-based state-based cryptography attempts, the central bank is actively pursuing digital-related technology behind the scenes.
He pointed out that if the European Central Bank issues digital currencies, it could cause bank confusion. Customers will have direct access to the central bank’s balance sheet, resulting in customers not having to hold a balance at a commercial bank and affecting the stability of the financial sector as a whole.
The move also focuses on credit allocation, which undermines the principles of an open market economy with free competition and violates EU charter restrictions. For this reason, it concluded that the European Central Bank is unlikely to issue the CBDC unless adequate regulation is introduced.
Venezuela was one of the first countries to issue a state-run cipher in 2018, but despite these efforts, Petro was unable to save the country’s economy. In Iran, some banks support digital currency backed by Paymon, while Egypt is reviewing the possibility of CBDC issuance.
Of course, in the case of Korea, the Bank of Korea also worried that the CBDC would lead to massive withdrawal of funds from the private sector, deterioration in liquidity and an increase in interest rates. For more information, please click here .