According to a study conducted by the Bank of Spain, digital currencies could improve monetary policy from different countries. Of course, this is not a recommendation to adopt virtual currencies, but instead it warns about the risks associated with these assets.
Virtual Currencies for Improving Monetary Policy?
The study has been performed by Galo Nuño, member of the General Directorate of Economy and Statistics. It has been published back on July the 30th in the official site of the agency.
It is important to mention that the analysis is focused on the influence of Central Bank Digital Currencies (CBDC). Several institutions in various countries have been analysing the effect that those cryptocurrencies could have in the economy.
Galo Nuño explained about that:
“An argument that could be considered at the time of assessing the introduction of CBDC is related to the improvement in the conduction of monetary policy through a better control in market returns that savers and borrowers have to face. Also, the possibility of eliminating he restrictions associated with the zero level of the interest rate is theoretically attractive, especially in an environment of low interest rates such as the current one.”
Furthermore, the document explains that it is not possible to establish negative rates with the current cash system. The situation would be very different with CBDC because the interest rates of these kind of assets, would be the one that ‘would mark the lowest value of them.’
At the same time, the author explains that the amount of cash in the economy keeps growing very fast in most economies. Furthermore, he says that the interest of central banks in creating digital currencies is not only related to change cash systems for digital ones.
Additionally, Bitcoin and Ethereum, among other currencies could help individuals excluded from the current financial system to be included. This would also help avoid money laundering activities if the user does inform its transactions in some way.
Until now, there haven’t been experiences related to these kind of virtual currencies used by governments or central banks around the world, making it difficult for central banks to analyse possible effects in the economy and society.
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