Can the current banking system coexist with a digital currency?
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Abstract
One of the most important effects that the digitalization of the economy can generate is a radical transformation of the financial system as we know it and, particularly, of the banking system. Central banks have already accepted that they need to provide a "digital currency" if they want to continue to maintain control over the monetary system for which they are responsible. However, the emergence of a "digital currency" managed by central banks conflicts with the capacity of commercial banks to create money through bank deposits. This conflict is conditioning the design of the new currency. The selected option, at least in the Eurozone, is to limit individual holdings of this new currency. However, we believe that the setting of quantitative limits will not prevent the transformation of the financial system that is to be avoided.
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References
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