CBDC and stability coins: Ernst & Young asks banks to "plan what to expect"

Ernst & Young (EY), one of the Big Four firms, has asked banks to change their border policy in line with the announcement the government-sponsored digital banking fund (CBDC) and fixed income securities will take place.

Ernst & Young's 2022 Global Regulatory Outlook highlights the need for policy changes to help financial services firms navigate uncertainties in the digital asset and cryptocurrency environment. Acknowledging the uncertainty in the digital asset market, the report states:

"If consumers could place their money in the intermediary bank, there would be no need for retail banking, and the different interest rates between businesses would be reduced."

EY recommends that banks work with local and national regulators to estimate the potential for cryptocurrency adoption and regularly monitor their business impact. The report also noted that digitization (other data and digital assets) has an impact on environmental management.

"The macroprudential or global impact of large profits with retail sales can be very important to the dollar for retail banks and small businesses. Therefore, "most mid-sized banks will generally opt for wholesale ."

EY discussed the potential for CBDCs to add or change fiat currencies and warned banks to consider the impact of their balance sheet if there is a conflict between CBDCs and stablecoins. Ernst & Young acknowledges the challenges of improving vision management and concludes:

"By understanding the broader concept of management, companies can take important steps to prepare for the future."

Last week, the Central Bank of Bahrain (CBB) partnered with US investment bank JP Morgan to conduct a CBDC experiment in Bahrain.

According to Cointelegraph, CBB has tried digital payments using Onyx, JPMorgan's blockchain and cryptocurrency distribution. Regarding reform, CBB Chairman Rasheed Al Maraj said that this experience was important for the Bahraini government to address and be able to eliminate existing inefficiencies in the cross-border payments industry, as borders are still there.