Existential threat? Why some banks are anxious about CBDCs

In the current climate, which is pretty hostile for the digital assets industry following the failures of 2022, central bank digital currencies (CBDCs) are often perceived as “crypto killers.”

This is hardly an overstatement, as financial authorities’ aspirations concerning CBDCs are relatively straightforward: return firmer control over the movement of money before it gets too decentralized.

Governments around the world are becoming more proactive in that direction. According to a survey by the Bank for International Settlements, 93% of central banks are already researching CBDCs, and there could be up to 24 CBDCs in circulation by 2030.

What is largely missing from the public discussion on CBDCs, especially within the crypto community, is that — besides crypto — national digital currencies actually have a very powerful adversary: banks.

For private financial institutions, the idea of a de facto state-controlled ecosystem of payments and transactions represents an existential threat, in no way less than private cryptocurrencies. Will they try to slow the CBDC revolution or choose to adapt to it?

How CBDCs challenge traditional banks

JPMorgan CEO Jamie Dimon is famous for his anti-crypto stance, calling the industry nothing more than “a decentralized Ponzi scheme.” When asked about CBDCs, the banker’s response was less passionate but no less anxious:

“I don’t trust it will be properly done. […] There’s a lot more to banking services than the actual token that moves the money. There are fraud risk alert services, call centers, bank branches, ATMs, CRA.” 

While there’s definitely a lot more to banking services than money movement, this abundance of opportunities would lose steam in the event of mass divestment, even if it happened exclusively among individual customers, not to mention corporate clients. 

By allowing individuals and businesses to hold and transact directly with the central bank, CBDCs could dilute the body of deposits and accounts and, hence, the money mass manipulated by private banking institutions.

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