Thursday, May 19, 2022

EY highlights the need for a policy change for banks regarding CBDCs and stablecoins.

The Takeaway:

A new report from EY highlights the need for a policy change for banks to overcome business uncertainties regarding digital assets.

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Big Four accounting firm EY has recommended that banks should change their regulatory perimeter to address the oncoming launches of central bank digital currencies (CBDC) and private stablecoins. EY’s 2022 Global regulatory outlook highlighted the need for a policy change to help financial services firms overcome business uncertainties amid mainstreaming digital assets and cryptocurrency. More and more countries are now exploring the CBDC option. 


EY recommended banking firms collaborate with regional and national regulators.

While acknowledging the uncertainty regarding the digital assets market, EY’s report stated: “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.” The accounting firm recommended banking firms collaborate with regional and national regulators to foresee possible crypto adoption and proactively assess its impact on their business. The report also identified digitalization — alternative data sources and digital assets — as a potential factor to impact the regulatory environment. 


EY warns banks of CBDCs and stablecoins. 

The EY report stated, “the macroprudential or international implications of a major currency having a retail coin could be very significant for retail banks and the dollarization of smaller economies. For that reason, most central banks are likely to pursue a wholesale version.” Highlighting the potential of CBDCs to complement or replace fiat currency, EY warns banks to think about the implications for their balance sheets amid the possible interaction between CBDCs and stablecoins. Acknowledging the difficulty in gaining regulatory clarity regarding digital currencies, the firm concluded: “By understanding the broad direction of regulation, firms can take proactive steps to prepare for what’s coming.”

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Jai Pratap
Jai Pratap
A Mass Media Graduate who loves to write. Jai is also a sports enthusiast and a big movie buff. He loves to learn new things.

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