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IPFS News Link • Federal Reserve

Philly Fed Report Says Central Bank Digital Currencies Could Be Dangerous

• Zero Hedge - Tyler Durden

Earlier this month, the Philadelphia Fed released a report called "Central Bank Digital Currency: Central Banking for All?" that sought to look at the idea of an account-based central bank digital currency (CBDC). Ultimately, it concluded that introducing a digital currency could wind up endangering traditional commercial banking. 

"The introduction of digital currencies may justify a fundamental shift in the architecture of a financial system, a central bank 'open to all,'" the paper opens by saying. 

Among the questions raised was the idea of whether a CBDC could allow individuals to have a direct account with a central bank, replacing the role of traditional commercial banks. 

The paper sought to understand if a CBDC could be used to prevent panics or bank runs that are cause from the typical "maturity transformation" banking practice in use by current financial institutions. The report concludes that this way of banking remains more susceptible to bank runs and money markets drying up due to lower short-term loan liquidity. 

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