CBDC (Central Bank Digital Currency) could increasingly lead 0.64 percent in consumption for Canada and up to 1.6 percent for the US. However, it is completely based on countries economics uses only cash respectively. Thus, the news comes along with report released on Thursday in which Bank of Canada’s researcher S. Mohammad R. Davoodalhosseini concerns over economic gains.
Meanwhile, a key factor to every ‘central banks’ that Davoodalhosseini asks, considering the present scenario of issuing a CBDC is whether cash and a digital form of fiat currency must coexist. Further, in that case yet another factor comes that how to manage the monetary policies with most advantageous.
Moreover, the economic welfare for both countries might be a better off as implementation is of no cost and the cash that is submitted with a CBDC.
The researcher writes;
“Having both cash and CBDC available to agents (consumers) sometimes results in lower welfare than in cases where only cash or only CBDC is available. This fact suggests that removing cash from circulation may be a welfare-enhancing policy if the motivation to introduce CBDC is to improve monetary policy effectiveness”.
However, the present every central bank’s monetary policies will be more enhanced with the intro of CBDC. It is due to banks are allowed to examine CBDC’s agents portfolios as well cross subsidize different types of agents. But, it is not possible if an agent makes use of cash.
The released report follows the other researchers from the country’s central banks to estimate the value of issuing a CBDC on cash. Meantime, several researchers argued that it makes difference between countries that are under developing and developed.
Recently, the Bank of Korea (BOK) stated in an official statement it also notes the planning of issuing CBDC. As per the statement, the CBDC study is still at “early stages” for its composite elements. BoK added, thus it was too early to decide on whether central bank of South Korea would issue CBDC. Moreover, it stated that it had kept a eye on global developments.
Image Source: Bank of Canada