BANK FOR INTERNATIONAL SETTLEMENTS EXEC ADVISES AGAINST CENTRAL BANK DIGITAL CURRENCIES

The world of finance is constantly evolving, with digital currencies becoming an increasingly prominent topic of discussion. Central bank digital currencies (CBDCs) are receiving more attention than ever before. Yet the motivations for issuance vary across countries, as do the policy approaches and technical designs. We investigate the economic and institutional drivers of CBDC development and take stock of design efforts. We set out a comprehensive database of technical approaches and policy stances on issuanceCentral Bank Digital Currencies (CBDCs), digital forms of a nation's fiat currency issued and regulated by its central bank, are at the forefront of this conversation.However, not everyone is convinced of their merits. Central banks must carefully weigh the implications for financial stability and monetary policy of issuing digital currencies, according to a report from the Committee on Payments and Market Infrastructures (CPMI) and the Markets Committee.Agustin Carstens, the General Manager of the Bank for International Settlements (BIS) and a known critic of Bitcoin, has recently voiced strong concerns against the implementation of CBDCs. Central banks typically take an interest in retail payments as part of their role in maintaining the stability and efficiency of the financial system and preserving confidence in their currencies.His apprehension stems from the potential for financial instability, the risk of facilitating bank runs, and the lack of sufficient legal frameworks in many countries to support these digital currencies.This stance from a key figure at the BIS, often called the ""central bank for central banks,"" raises important questions about the future of digital finance and the role of central banks in this rapidly changing landscape.Are CBDCs truly the future of money, or are they a potential threat to the stability of the global financial system? Skip to main content Bitcoin Insider. MenuThis article delves into the arguments against CBDCs, as highlighted by the BIS and other experts, exploring the potential risks and challenges associated with their adoption.

Agustin Carstens' Warning Against CBDCs

Agustin Carstens, a vocal Bitcoin critic and the General Manager of the Bank for International Settlements (BIS), has been a prominent voice cautioning against the rush to adopt Central Bank Digital Currencies (CBDCs).In a speech delivered in Dublin on March 22nd, Carstens outlined his concerns, emphasizing the potential for these digital currencies to destabilize the financial system.

His primary argument revolves around the risk of bank runs. Bitcoin critic and general manager at the Bank for International Settlements advised against the issuance of CBDCs. Bitcoin critic and general manager at the Bank for International Settlements Agustin Carstens advised against the issuance of central bank digital currencies (CBDCs) in a speech in Dublin on March 22.In a traditional banking system, customers might hesitate to withdraw their funds en masse due to the inconvenience and potential delays.However, a CBDC would allow individuals to instantly transfer their money from commercial banks to central bank accounts. Image: Kai Stachowiak, Block Chain (Publicdomainpictures.net) The race to have a platform through which many countries can use their central bank digital currencies ( CBDCs ; e.g, digital yuan, dollar, or euro) to safely, efficiently, and inexpensively settle cross-border deals has drawn even more attention after China and three other jurisdictions recently announced their success inThis ease of transfer could trigger rapid and widespread bank runs, potentially leading to the collapse of commercial banks and a severe disruption of the financial system.The speed and scale of such digital runs would be unprecedented and difficult for central banks to manage.

Beyond the immediate threat of bank runs, Carstens also questioned the legal basis for issuing CBDCs in many jurisdictions.He argued that many central banks lack the necessary legal powers to create and regulate these digital currencies effectively. iv Central Bank Digital Currency: The Payments Perspective List of Boxes Box 1: Overview of the Other Two Notes of the World Bank Package on CBDC 8 Box 2: Components of the National Payments System 10This legal ambiguity could create uncertainty and undermine public trust in CBDCs.

The BIS Perspective on CBDCs

The Bank for International Settlements (BIS) plays a crucial role in the global financial system. 4 Central bank digital currencies: foundational principles and core features Today, central banks issue two types of money and provide infrastructure to support a third. Physical cash and electronic central bank deposits, also known as reserves or settlement balances, are issued. Physical cash is widely accessible and peer -to-peer.It serves as a forum for international cooperation among central banks, providing research, analysis, and recommendations on various financial matters, including digital currencies. this report takes stock of the international dimensio n of central bank digital currency (CBDC, see glossary) projects and the extent to which they could be used for cross-border payments. The report also investigates possible macro-financial implications associated with the cross-border use of CBDCs. TheWhile the BIS acknowledges the potential benefits of CBDCs, it also emphasizes the importance of careful consideration and a cautious approach.

Key Concerns Highlighted by the BIS

Several reports and papers published by the BIS and its committees, such as the Committee on Payments and Market Infrastructures (CPMI) and the Markets Committee, have shed light on the potential risks associated with CBDCs:

• Financial Stability: The BIS stresses the need to carefully assess the impact of CBDCs on financial stability.As Carstens pointed out, the ease of transferring funds to central bank accounts could exacerbate bank runs and destabilize the banking sector.
• Monetary Policy: The introduction of CBDCs could also have implications for monetary policy.Central banks need to understand how CBDCs would affect the transmission of monetary policy signals and the overall effectiveness of monetary policy tools.
• Cross-Border Payments: While CBDCs could potentially improve the efficiency of cross-border payments, the BIS also recognizes the challenges involved in coordinating different CBDC systems and addressing potential macro-financial implications.
• Legal and Regulatory Frameworks: The BIS emphasizes the importance of establishing clear legal and regulatory frameworks for CBDCs to ensure their safe and efficient operation.

Potential Benefits of CBDCs (and Why They're Not Enough)

Despite the concerns raised by Carstens and the BIS, it's important to acknowledge the potential benefits of CBDCs.Many countries are exploring CBDCs as a way to modernize their payment systems, promote financial inclusion, and combat illicit activities.

Why are countries exploring CBDCs?

1. Improved Payment Efficiency: CBDCs could offer faster, cheaper, and more efficient payment methods compared to traditional systems.
2. Financial Inclusion: CBDCs could provide access to financial services for underserved populations who may not have bank accounts.
3. Combating Illicit Activities: CBDCs could enhance transparency and traceability in financial transactions, making it more difficult to engage in money laundering and other illicit activities.
4. Central Bank Control: CBDCs would provide central banks with greater control over the money supply and the ability to implement monetary policy more effectively.
5. Innovation: CBDCs could foster innovation in the financial sector, leading to the development of new products and services.

However, the BIS and Carstens argue that these potential benefits do not outweigh the risks.Carstens contends that the risks to financial stability are too significant to ignore, especially given the potential for rapid and widespread bank runs.The need for robust legal frameworks and international coordination further complicates the implementation of CBDCs.

The Reality of CBDC Development Globally

Despite the warnings, many central banks around the world are actively researching, experimenting with, or even launching CBDCs.A 2025 survey by the BIS found that a significant majority of central banks are engaged in some form of CBDC-related work.However, the motivations and approaches vary widely across countries.

Factors driving CBDC development:

• Economic Drivers: Countries with inefficient payment systems or high levels of cash usage may be more inclined to explore CBDCs as a way to improve payment efficiency and reduce costs.
• Institutional Drivers: Countries with strong central banks and well-developed regulatory frameworks may be better positioned to develop and implement CBDCs safely.
• Geopolitical Drivers: Some countries may be motivated to develop CBDCs to enhance their sovereignty and reduce their reliance on foreign currencies or payment systems.

China is among the leading countries in CBDC development, with its digital yuan project making significant progress. Bitcoin (BTC) critic and general manager at the Bank for International Settlements (BIS) Agustin Carstens advised against the issuance of central bank digital currencies (CBDCs) in a speech in Dublin on March 22. Per the report, Carstens explained that a CBDC could facilitate a bank run, enabling people to move their funds from commercial banks to central bank accounts faster, thusOther countries, such as Sweden and the Bahamas, have also launched or are piloting CBDCs.However, these projects are still in their early stages, and their long-term impact remains uncertain.

The Challenge of Cross-Border CBDC Payments

One of the potential benefits of CBDCs is their ability to facilitate cross-border payments more efficiently. On, a group of central banks, together with the Bank for International Settlements, published a paper on central bank digital currencies (CBDC): ongoing policy perspectives.However, achieving seamless cross-border CBDC payments presents several challenges.

Challenges with cross-border CBDC payments:

• Interoperability: Different CBDC systems need to be interoperable to allow for seamless transactions between countries.
• Regulatory Differences: Countries have different regulatory requirements for CBDCs, which can create obstacles to cross-border payments.
• Macro-Financial Implications: The cross-border use of CBDCs could have significant macro-financial implications, such as capital flow volatility and exchange rate fluctuations.
• Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT): Ensuring compliance with AML and CFT regulations is crucial for cross-border CBDC payments.

To address these challenges, international cooperation and coordination are essential.The BIS is working with central banks to develop standards and protocols for cross-border CBDC payments, but significant progress is still needed.

The Risk of Bank Runs Revisited

As Carstens and the BIS have emphasized, the potential for bank runs is a major concern with CBDCs.The ease with which individuals can transfer funds from commercial banks to central bank accounts could trigger rapid and destabilizing outflows from the banking system.

Mitigating the risk of bank runs:

There are several potential measures that could be taken to mitigate the risk of bank runs:

• Limiting CBDC Holdings: Central banks could impose limits on the amount of CBDC that individuals can hold.
• Tiered Interest Rates: Central banks could offer lower interest rates on CBDC holdings above a certain threshold.
• Transaction Limits: Central banks could impose limits on the size and frequency of CBDC transactions.
• Circuit Breakers: Central banks could implement circuit breakers to temporarily halt CBDC transfers during periods of high volatility.

However, these measures may not be sufficient to completely eliminate the risk of bank runs. Central banks all over the world are actively exploring central bank digital currencies (CBDCs), but few countries have launched CBDC as a legal means of payment. CBDC refers to the digital version of a country's fiat currency, but in different forms and with different roles as set out by each country (Cong et al, 2025). According to the CBDCThe effectiveness of these measures would depend on their design and implementation, as well as the specific characteristics of each country's financial system.

The Legal and Regulatory Landscape for CBDCs

A clear and comprehensive legal and regulatory framework is essential for the safe and efficient operation of CBDCs. Central bank digital currencies 1 Executive summary Interest in central bank digital currencies (CBDCs) has risen in recent years. The Committee on Payments and Market Infrastructures and the Markets Committee recently completed work on CBDCs, analysing theirHowever, many countries currently lack the necessary legal powers to issue and regulate these digital currencies effectively.

Key legal and regulatory considerations:

• Legal Tender Status: Determining the legal tender status of CBDCs is crucial.Should CBDCs be mandatory for acceptance, or should businesses and individuals have the right to refuse them?
• Data Privacy: Addressing data privacy concerns is essential to build public trust in CBDCs.How will central banks protect the privacy of CBDC users?
• AML/CFT Compliance: Ensuring compliance with AML/CFT regulations is critical to prevent CBDCs from being used for illicit activities.
• Consumer Protection: Protecting consumers from fraud and other risks associated with CBDCs is essential.
• Cybersecurity: Implementing robust cybersecurity measures is crucial to protect CBDC systems from hacking and other cyber threats.

Developing a comprehensive legal and regulatory framework for CBDCs is a complex and time-consuming process. Bank for International Settlements Exec Advises Against Central Bank Digital CurrenciesIt requires careful consideration of various legal, economic, and social factors.

Are CBDCs Inevitable?

Despite the concerns and challenges, the development of CBDCs continues to gain momentum around the world.Are they inevitable? Agustin Carstens, the critic of Bitcoin (BTC) and general manager of Bank for International Settlements, warned against the introduction of digital currencies (CBDCs) by central banksThe answer is not straightforward.

While many central banks are actively exploring CBDCs, it is not a foregone conclusion that they will all launch them.The decision to issue a CBDC depends on a variety of factors, including the specific needs and circumstances of each country, as well as the potential risks and benefits.It is highly likely that CBDC adoption will vary greatly from country to country.

Some countries may find that the benefits of CBDCs outweigh the risks, while others may conclude that the risks are too high.Even if a country decides to launch a CBDC, it may take years to develop and implement it successfully.

Conclusion: A Cautious Approach to CBDCs is Needed

The debate surrounding Central Bank Digital Currencies is complex and multifaceted.While CBDCs offer potential benefits, such as improved payment efficiency and financial inclusion, they also pose significant risks, including the potential for financial instability and bank runs. Bitcoin critic and general manager at the Bank for International Settlements advised against the issuance of CBDCs. Please note, this is a STATIC archive of website cointelegraph.com from, cach3.com does not collect or store any user information, there is no phishing involved.Agustin Carstens's warning against the issuance of CBDCs highlights the importance of careful consideration and a cautious approach. August Carstens, Bank for International Settlements Exec Advises Against Central Bank Digital Currencies. Altcoin NinjasThe Bank for International Settlements (BIS) also emphasizes the need for thorough analysis and robust legal frameworks before implementing CBDCs.

As countries continue to explore the possibility of issuing CBDCs, it is crucial to weigh the potential benefits against the risks, to address the legal and regulatory challenges, and to foster international cooperation.The future of digital finance is uncertain, but one thing is clear: a thoughtful and prudent approach to CBDCs is essential to ensure the stability and integrity of the global financial system.

Key Takeaways:

• Agustin Carstens, General Manager of the BIS, advises against CBDCs due to potential financial instability.
• The BIS emphasizes the importance of carefully weighing the risks and benefits of CBDCs.
• Bank runs are a major concern with CBDCs due to the ease of transferring funds.
• Clear legal and regulatory frameworks are essential for CBDCs.
• International cooperation is crucial for cross-border CBDC payments.

What are your thoughts on CBDCs?Share your opinions in the comments below!