Cash king dies: Netherlands bank touts CBDC

The Bank of the Netherlands highlights the benefits of central bank digital currency (CBDC) to which she devotes a detailed study. She also says she is ready to play a driving role in Europe in case of experimentation.

The european central banks continue to develop their skills on the issue of digital currencies. In February, Sweden launched for example a pilot for his national currency (e-krona). Last month, the Bank of England opened a public debate on the CBDC.

The central bank of the netherlands also conducts its own work. She has just delivered a detailed report on the central bank digital currency. The DNB (De Nederlandsche Bank) It details the objectives, prerequisites and choice of design for such a monetary instrument.

Declining cash legitimizes debate on CBDC

And if the Netherlands, like Sweden in particular, is very interested in the subject, it is for a main reason: the decline in cash as a means of payment. The central bank stresses that this trend is confirmed in the country.

Cash is no longer king. As a result, citizens and businesses are using less and less money from central banks to pay for their purchases, "she said.

The decline in cash, and therefore in parallel with the place of a central bank, leads the latter to wonder about the advisability of a CBDC.

The announcement of Libra by Facebook, which recently downgraded ambitionsis another reason for studying the CBDCs, the DNB also acknowledges. For these various reasons, the central bank claims a "positive attitude towards the CBDCs".

Its introduction could help the payment system to function properly. For example, the CBDC could serve as a safeguard for payments made in private money, since we become extremely dependent on private money in a payment system that is rapidly digitizing, "she said.

Measures to control the circulation of the CBDC

The Bank of the Netherlands does not ignore the risks associated with CBDC however. In the event of a financial crisis, a currency of this type could indeed help accelerate the bankruptcy of a bank. Citizens and businesses would then tend to convert their balances with private banks in the CBDC.

"It is therefore crucial that measures are taken to control the quantity of CBDCs in circulation" warns the Dutch authority in this regard. The latter also makes several proposals relating to the design and operation of a digital currency.

The From Nederlandsche Bank suggests, for example, that private companies develop applications for households and businesses for payments in CBDCs. Another of its recommendations is the adoption, for the benefit of the CBDC, of ​​technologies designed by crypto players.

The Bank of the Netherlands therefore calls for "a deeper political debate on the CBDC At the national level, but above all at European level States where species remain widely used tend to remain distant from this subject today.

The debate must be conducted more broadly in the euro area, since it is the Eurosystem which will decide on the introduction potential of the CBDC. Additional European regulations may also be necessary, ”said the DNB.

As such, it indicates that the Netherlands ready to play leading role in Europe. They "constitute an appropriate testing ground for such an experiment" concludes the Dutch central bank.