Banking Exchange Magazine Logo

Central Bank Digital Currencies Could Threaten Financial Stability and Privacy

Academics argue that universal digital dollars could threaten financial stability and privacy

  • |
  • Written by  Banking Exchange staff
  • |
  • Comments:   DISQUS_COMMENTS
Central Bank Digital Currencies Could Threaten Financial Stability and Privacy

Central bank digital currencies (CBCD) are not required to promote faster payments and could potentially threaten financial stability and privacy, academics have claimed.

According to a report in the Financial Times, academics Stephen Cecchetti and Kim Schoenholtz argue that CBDC are “not needed” since public and private sectors already provide cheaper, faster, more reliable, and more accessible systems.

Non-CBCD services include the TIPS system in Europe, Faster Payments in the UK. The Federal Reserve is also set to launch its own instant payments service, FedNow in 2023.

The pair also highlight that privacy is an issue since CBDC results in transactions becoming traceable which poses “serious threats” to personal liberty.

Cecchetti and Schoenholtz said that CBCD is being spurred by “fear of being left behind” and advises that central banks should “go slowly to ensure a safe design”.

As cryptocurrencies surge in popularity, US regulators have been exploring how the sector might be regulated.

Last month, the American Bankers Association (ABA) highlighted its regulatory concerns around crypto assets. In a letter to the Federal Deposit Insurance Corporation the ABA has urged for clarity around what types of digital asset activity are allowed for banks.

The report said: “Because of the novel nature and rapid development of crypto, the regulatory framework surrounding the space is constantly evolving. A main focus for regulators has been the desire to promote responsible innovation while protecting against risks.”

Although progress has been made in the ‘cryptofed’ sector. In July, the American CryptoFed DAO was legally recognised by the state of Wyoming as the country’s first decentralized autonomous organization.

CEO of the American CryptoFed DAO, Marian Orr commented that the DAO law has created an opportunity for a “true digital currency with mass acceptance to be possible”.

back to top


About Us

Connect With Us


Webinar — Leveraging Open Banking Trends to Transform Your Institution

Time/Date: October 5th, 2:00 CT

The concept of open banking is ushering in exciting new possibilities for financial institutions of all sizes, transforming how they do business and driving new revenue opportunities. Join Shane Ferrell, Vice President of Product Strategy and Director of Software Engineering Barkley Hughes as they answer these questions and more: 

• What is open banking, and how does a financial institution take full advantage of this rapidly growing technology?

• What are key areas to look for when considering leveraging a third-party technology or an open banking marketplace?

• What role does FDX play in the future of open banking?


This webinar is brought to you by:
OneSpan logo