Here are some clips from expert Rebecca Walser on the current situation with CBDC and Banks. All this is stage setting we expected to see in 2023!!!

(Find full interview here: …(read more)

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Stage Setting: CBDC FedNow 2023 & Potential Bank Failures

As we enter the year 2023, the implementation of Central Bank Digital Currencies (CBDCs) looms on the horizon, with the Federal Reserve’s CBDC project, FedNow, at the forefront. This groundbreaking development has the potential to revolutionize the way we transact and interact with money, but it also raises concerns about the stability of the banking sector and the possibility of potential bank failures.

CBDCs are digital forms of fiat currency issued and regulated by a central bank. With their introduction, individuals and businesses will be able to make instantaneous, secure, and direct payments without the need for intermediaries like traditional banks. This promises greater financial inclusion and efficiency, eliminating the time-consuming processes associated with paper-based transactions.

FedNow, initiated by the Federal Reserve, aims to provide the public with access to instant payment services that operate around the clock. Expected to be fully operational by 2023, it will enable individuals and businesses to send and receive funds instantly using their smartphones or other digital devices. This 24/7 availability and convenience could reshape the global financial landscape, leading to increased economic activity and growth.

However, such a transformative change in the banking system brings its own set of risks. One major concern is the potential for bank failures. With the rise of CBDCs, individuals may choose to hold their funds directly in digital wallets provided by central banks rather than depositing them in commercial banks. This shift in behavior could lead to a significant decrease in bank deposits, resulting in a decline in the liquidity of commercial banks.

If a significant number of depositors decide to switch their funds to CBDCs, it could create a liquidity shortage for commercial banks, making them vulnerable to financial distress. Without sufficient deposits, banks may struggle to lend money, impacting credit availability and ultimately hampering economic growth.

Moreover, the introduction of CBDCs allows central banks to have direct control over monetary policy and the ability to implement negative interest rates. Negative interest rates essentially mean depositors would be charged for holding money in their accounts. While this measure can incentivize spending and stimulate the economy, it may also encourage individuals to withdraw their funds from commercial banks and seek alternative investment options. Such a mass exodus could weaken the banking sector, potentially leading to bank failures if precautionary measures are not put in place.

To mitigate these risks, central banks must carefully navigate the transition to CBDCs, ensuring the stability of the banking sector. Capital adequacy requirements may need to be reassessed, and robust liquidity management frameworks should be implemented to withstand potential shocks. Additionally, policymakers should promote public confidence in the banking system, emphasizing the benefits of retaining funds in commercial banks, such as protection under deposit insurance schemes.

It is crucial for central banks and financial regulators to closely monitor the adoption of CBDCs and their impact on the banking sector. Continual assessment and adjustment of regulatory measures may be necessary to maintain stability and ensure that potential bank failures are effectively prevented or managed.

In conclusion, the introduction of CBDCs, specifically the implementation of FedNow in 2023, represents a significant milestone in the evolution of digital currencies and financial transactions. While the potential benefits are vast, the risk of potential bank failures must not be overlooked. Central banks and financial regulators must remain vigilant, implementing appropriate safeguards and adapting regulatory frameworks to mitigate these risks and foster a smooth transition into this new era of digital finance.