JPMorgan: CBDC Development Should Not Disrupt Existing Banking Infrastructure
Banks represent the commercial financial infrastructure in any given economy and therefore should not be under the threat of being phased out by the development of central bank digital currencies, according to JPMorgans strategist Josh Younger. Younger said in a note on Thursday that CBDCs hold massive potential in addressing economic inequality by introducing new retail loans and payment channels. However, their development should take care not to cannibalize the existing banking infrastructure, since this would lead to 20% to 30% destruction of their funding base which comes directly from investments by commercial banks. Retail CBDCs Will have a Smaller Market Share Than Banks According to JPMorgan, while CBDCs will accelerate financial inclusion further than banks have been able to, they can still do so without significant disruption of the structure of the monetary system. The reason behind this being that the majority of people who will benefit the most from CBDCs have less than $10,000 in their checking accounts. Such balances, Younger said, only represent a small share of the total funding, meaning that banks would still hold the majority of shares. “If every last one of those deposits were to hold only retail CBDC, it would not have a material impact on bank