Representative from Bank of Italy presented an idea of cryptocurrency usability all across Europe.
Fabio Panetta, deputy governor of the Bank of Italy, gave a note, focusing on central bank digital currencies (CBDCs) at the Conference in Milan Thursday, June 7.
Unlike cryptocurrencies - “risk involvement asset” - the deputy governor stressed from the outset that a CBDC would be a risk of the central bank, backed by its assets.
Where Panetta saw a key potential reason for CBDC issuance was to reduce costs in the production, transportation, and disposal of cash. He gave approximate estimations that these costs amount to about half of a percentage point of GDP in the EU annually, around €76 bln.
Considering CBDCs’ potential use as a store of value, Panetta highlighted that in addition to virtually zero storage costs, a CBDC could function as an asset with “unique characteristics,” without credit and liquidity risks. As such, it could become preferable to other means of storing wealth, including bank deposits.
Panetta however nuanced concerns that a switch from bank deposits to a CBDC would necessarily threaten the financial system as a whole, even though it might squeeze the net interest margin (NIM) profitability that underpins banks’ lending models.
Panetta notably raised traceability and privacy - “probably the most important issue” surrounding CBDCs - as a “political” question for society as a whole, beyond the purview of central banks alone.