The race to become the first major world economy to release the central bank digital currency (CBDC), has strengthened – the European Central Bank recognized that in this process it is beneficial to be the first.
These conclusions are made in an article written by the economist from the department of analysis of international policy of the ECB Massimo Minesso Ferrari in collaboration with two politicians.
“Paralleling the introduction of CBDC can give the issuer a significant first-hand advantage,” says Ferrari’s article.
In addition, it is generally stated that countries without CBDC will find themselves in an unfavorable position compared to other states that have issued such currencies. It is likely that they are losing control over their own monetary policy due to the “side effects” and competition.
Since investors will tend to buy CBDC, pushing bonds and other assets on the second plan, the effect of these transboundary “secondary effects” can be significant.
“The presence of the CBDC in a significant way enhances international secondary shocks, thus stimulating international connections.”
The authors explain their views further:
“The presence of CBDC has a significant impact on monetary policy … and enhances the balance in the international currency system. In particular, the release of CBDC by the internal economy will noticeably reduce the autonomy of the monetary policy in the external economy. This forces the foreign central banks to change their monetary policy to mitigate the stronger international secondary effects generated by the CBDC. ”
Over the past few months, the ECB has intensified its efforts to implement the digital euro, while the central banks of Japan and South Korea are trying to catch up with China which went to the final stage of testing the digital yuan.
