Why are banks finally waking up to the new age of digital currencies?

For central banks contemplating issuing a digital currency, there could be advantages to getting it done soon, according to a European Central Bank study

A country without a digital currency would lose some control over its monetary policy by being forced to react more strongly to spillovers from shocks in nations that do have such an instrument, researchers Massimo Minesso Ferrari, Arnaud Mehl, and Livio Stracca found.

They predict that such international spill overs would be amplified “to a significant extent” in open economies because the cash-like and asset-like qualities of digital currencies would be attractive to investors.

“Introducing a central bank digital currency sooner rather than later could give rise to a significant first-mover advantage to its issuer,” the authors wrote.

The study could have significant implications for central banks worldwide as they explore how and if to launch digital versions of their currencies.

The People’s Bank of China has already made significant headway in pilot tests with consumers.

ECB President Christine Lagarde said last week that while her institution is “not racing to be first,” her “hunch” is that it could create a digital currency within years.

Is this just a financial fad?

It seemed like that to many in the field but no longer. Agustin Carstens, the former Governor of Banco de Mexico turned general manager of the Bank of International Settlements, the so-called central bank for central banks, said in March 2019 that “research and experimentation have so far failed to put forward a convincing case” for central bank digital currencies.

But the week after the Libra announcement, Carstens said digital currencies could appear “sooner than we think.” The Bank of England has recently said it’s reviewing whether it should create a central bank-backed digital currency, and according to governor Andrew Bailey, the country “will be heading toward some sort of digital currency” in a few years’ time.

Insiderkk was not a fan of digital currencies until they understood that block chain technology is here to stay.If digital coins become centralised, what will happen to bitcoin? Want to join millions buying them?

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