Miguel Fernández Ordóñez, former Governor of the Bank of Spain during the Great Financial Crisis, suggested today that the end game for central bank digital currencies (CBDCs) is to replace commercial bank deposits entirely. In other words, all commercial banks should become so-called “narrow banks”. Mr. Fernández Ordóñez was talking this morning during the Digital Euro Conference.
“If Silicon Valley Bank would (have been) Silicon Valley CBDC service provider, you (would) never ha(ve) runs because CBDC is money. It is not a promise to pay money that could fail,” he said.
The former Governor argued that a digital euro has the potential to solve two interrelated problems in the monetary and banking system: stability and competition. According to him, banks have monopolized the payment and credit market, as there is no possibility to offer payments without going through a commercial bank account. These banks are also heavily protected by regulations, as well as legislation to safeguard stability such as Basel III, deposit insurance schemes, and central banks acting as lenders of last resort, which shelter the sector from newcomers.
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