A study conducted by analyst Bank of Canada (BoC) showed that the crypto-currency issued by the Central Bank, will potentially benefit the economic welfare of the country.
In the working document of the BoC stated that the introduction of digital currency Central Bank (CBDC) “can lead to an increase in consumption by 0.64% for Canada, and 1.6% for the US compared with their respective economies, using only cash”.
The analysis, titled “Digital currency and Central Bank monetary policy” for the economies of the US and Canada held by the chief economist of the Department of foundations and banks BoC devadasan of Mohammad (Mohammad Davoodalhosseini). He noted that the key question for Central banks contemplating a release CBDC — whether it is to coexist with the money form. And if the answer is positive, as in this situation to sustain an optimal monetary policy.
Based on detailed modeling and mathematical calculations, Devadasan argues that economic prosperity of a country may increase when changing cash at CBDC provided that the implementation of this will not be overly expensive.
“Circulation and cash and CBDC agents (consumers) sometimes leads to lower welfare compared to options which only cash or only CBDC. This fact suggests that the removal of cash from circulation may be policies to improve welfare if the motivation of the introduction of the CBDC is to improve the efficiency of monetary policy,” he wrote in a working paper.
According to the analyst, the implementation of the CBDC can provide Central banks more flexibility to adjust the current monetary policy.
“This is due to the fact that the Central Bank can control the portfolios and the CBDC agents to cross-subsidize, but such action is impossible if agents use cash,” said the analyst.
The possibility of producing CBDC in one form or another is seen in a number of countries, including China, Norway, Thailand and Iran. In some countries, e.g., Korea and Switzerland, Central banks have come to the conclusion that such a move carries risks for economic stability. The same analysts say the Bank of international settlements. And in a recent report of the Committee on economic and monetary Affairs (ECON) of the European Parliament argues that CBDC can help to regulate the problems of competition in the cryptocurrency market.