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Ernst&Young: CBDC and stablecoins threaten stability of commercial banks

A new report from consulting firm Ernst&Young highlights the need for bank policy changes to address the challenges posed by central bank digital currencies and stablecoins.


In its 2022 Global Regulatory Outlook report, Ernst&Young pointed to the need to review the regulatory policies of commercial banks in order to cope with the financial uncertainty associated with the spread of central bank digital currencies (CBDCs) and private stablecoins.

“If customers can keep their money with a central bank, they have no need for a retail bank, and firms will see their interest rate margins contract precipitously.”

EY recommended that financial companies work with regional and national regulators to anticipate the implications of digital currencies implication and assess their impact on the banking business in advance.

“Banks will need to think about the implications for their balance sheets and the possible interaction between central bank digital assets and private ones, such as stablecoins.”

According to EY, the introduction of CBDC into retail circulation may lead to negative consequences for commercial banks and increase the dollarization of small economies, therefore, according to analysts, most central banks will prefer the wholesale version of CBDC, available only for interbank interaction.

“A second way that the regulatory perimeter is expanding is addressing cryptocurrencies, digital assets, tokens and related products and services. As the acceptance and transaction volume of these assets has grown, there is increasing momentum to address regulatory concerns — along with financial stability and investor protection — head on.”

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