NEW YORK: The European Central Bank (ECB) and the United States Federal Reserve (Fed) have each said that they do not intend to abolish physical cash if and when a central bank digital currency (CBDC) is introduced. There are good reasons not only to support the early introduction of CBDCs but also to pay interest on them and abolish cash. Another concern is that the central bank, as the CBDC issuer, might obtain sensitive information about CBDC holders' finances and private spending decisions. If — and only if — a CBDC bears interest and is accompanied by the abolition of physical cash, it will enhance the effectiveness of monetary policy by eliminating the effective lower bound (ELB) on policy interest rates. Similarly, while no CBDC can fully replicate the privacy of physical cash, that might not be so bad.

Source: Manila Times December 17, 2023 04:01 UTC