Opinion

Why Central Bank Digital Currencies Will Destroy Cryptocurrencies

By Nouriel Roubini

Nouriel Roubini

In due time, CBDC-based narrow banking and loanable-funds intermediaries could ensure a better and more stable financial system.

The world’s central bankers have begun to discuss the idea of central bank digital currencies (CBDCs), and now even the International Monetary Fund and its managing director, Christine Lagarde, are talking openly about the pros and cons of the idea.

This conversation is past due. Cash is being used less and less, and has nearly disappeared in countries such as Sweden and China. At the same time, digital payment systems – PayPal, Venmo, and others in the West; Alipay and WeChat in China; M-Pesa in Kenya; Paytm in India – offer attractive alternatives to services once provided by traditional commercial banks.

Most of these fintech innovations are still connected to traditional banks, and none of them rely on cryptocurrencies or blockchain. Likewise, if CBDCs are ever issued, they will have nothing to do with these over-hyped blockchain technologies.

Read the full Project Syndicate article.
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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.