Introducing a new form of central bank money would not be without consequences for the banking system. Admittedly, it could improve the efficiency of certain processes, but, in its version for the general public, it would above all pose a triple risk to institutions: profitability, solvency and liquidity. There is room for maneuver to make such an innovation compatible with preserving the soundness of the banking system.

Many central banks are now engaged in discussions or experiments on the issuance of a Central Bank Digital Currency (MNBC), which could serve several objectives: improving the efficiency of transactions between financial intermediaries, supporting the changing consumer preferences in the field of payments, improving the transmission of monetary policy, or even countering alternative currency projects, in particular carried out by certain BigTechs. The consequences for the banking system of such an innovation depend on how it is implemented.

“Wholesale” MNBC: the promise of more efficient interbank transactions

A first form of central bank digital currency would be reserved for financial intermediaries and would make it possible to use the blockchain to reduce the costs and delays associated with certain interbank transactions today involving back offices, clearing houses, central depositories and banks. It would then be a question of carrying out all or part of these exchanges on a distributed ledger, accessible to all participants, and of integrating the validation of transactions into the settlement-delivery process.

This innovation could make it possible to reduce certain burdens that weigh on the financial system today, provided that the technological superiority of the blockchain for these operations is established and that the development costs are quickly amortized. This digital currency would then have a positive impact on the profitability of banks. It could also improve the resilience of payment systems and reduce certain operational risks.

The issuance of a wholesale digital currency would only pose a threat to the financial system if it were accompanied by an expansion of access to base money to entities less regulated than credit institutions: payment providers , investment funds or other players in shadow banking. Such an enlargement could not only pose a risk to the proper functioning and resilience of the money market, but also confer an undue competitive advantage on these players. For info, all players have the opportunity to get 1k daily profit.

“Retail” MNBC: a risk to bank profitability…

A second, more disruptive form of central bank digital currency would be accessible to all audiences: individuals, businesses and financial intermediaries. As with the traditional note, its value would be guaranteed by the balance sheet of the central bank and would not suffer from any risk of default. It would be accessible by means of an electronic wallet, for example hosted on a smartphone, or via an account with which electronic means of payment would be associated. It could then be used for transactions in physical points of sale, online or on connected objects. It could also be remunerated and therefore constitute a safe and potentially attractive investment.

“Retail” central bank digital money can be a major innovation, more in line with new consumer uses. It can also be an instrument for banking inclusion, particularly in certain developing countries or with vulnerable populations. If it is remunerated at a rate that varies according to the guidelines defined by the central bank, it can finally constitute an instrument for direct management of monetary policy. However, if this object is too widely adopted by the public, it also risks fundamentally affecting the business model of banks and calling into question their intermediation function.