JP Morgan Warns Hasty CBDC Implementation Could “Cannibalize” Financial System

Prashant Jha
August 6, 2021
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JP Morgan, the American Banking giant has warned against the hasty implementation of Central Bank Digital Currencies (CBDC). The bank said the creation of a new CBDC based retail loan and payments channels must not come at the cost of the existing financial system. Hasty implementation of the CBDCs in the retail market could “cannibalize” existing financial infrastructure.

The comments came from JP Morgan strategist Josh Younger who called for financial inclusion in the CBDC plan. He said it is possible to have more financial inclusion without the need to alter the existing monetary system.

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CBDC Accounts May Lead to 20%-30% Funding Base Exodus

Younger said if CBDCs become a mainstream form of transaction it could lead to a 20%-30% exodus of funding base from existing commercial banks. Banks utilize the deposited money for funding and offer interest to customers. A sudden move to CBDCs based accounts could disrupt the banking system as it would leave no funds with the commercial bank to offer loan or mortgage services.

Younger proposed a $2,500 cap for CBDC accounts as it would meet the needs of lower-income households without any major impact on the banking system. A majority of American households have less than $1,000 in their checking accounts, thus a $2,500 limit is a safe bet.

“If every last one of those depositors were to hold only retail CBDC, it would not have a material impact on bank funding,” Younger said.

The US Lawmakers are planning to pass a stable count law as well that would allow commercial banks to offer stablecoin services to consumers. A conflict between CBDCs and commercial stablecoin could also arise if the popularity of commercial stablecoin rises.

Stablecoins are in high demand with billions being used to settle transactions on various exchanges. As major nations progress towards the launch of their national soverign digital currencies, a conflict between the two is quite probable.

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Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
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Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
An engineering graduate, Prashant focuses on UK and Indian markets. As a crypto-journalist, his interests lie in blockchain technology adoption across emerging economies.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.