Moody’s Believes CBDCs Threat Bank’s Profits

Moody’s Investor Service reported on March 21 the introduction of cross-border transaction technology related to central bank digital currencies (CBDCs) could revolutionize the global economy with faster, more affordable, and more secure services for its participants.

However, this could be detrimental to banks as the new infrastructure would reduce their role significantly. While banks may benefit from decreased settlement risk, they could also suffer from reduced profits from payments, correspondent services, and foreign exchange transactions.

Additionally, banks may have to invest resources to join new networks and create infrastructure to support CBDC interoperability.

In order to avoid digital islands, central banks may have to make compromises on decision-making to make their CBDCs interoperable, as suggested by the Bank for International Settlements.