Big Four accounting firm EY has advised banks on the need to adjust their regulatory environment. According to the report, this will enable banks to stay abreast with oncoming launches of central bank digital currencies (CBDCs).
There’s Need For Policy Changes — EY To Banks
According to EY’s global regulatory outlook for 2022, the firm admits there’s so much business uncertainties in the digital assets markets. And this is mainly due to the mainstreaming of cryptocurrency and digital assets. However, EY then suggests the need for financial services providers to activate policy changes that will see them overcome these uncertainties.
The report stated in part:
“If customers can keep their money with a central bank, they have no need for a retail bank, and firms will see their interest rate margins contract precipitously.”
Another one of EY’s recommendations to banking firms, is that they should partner with both local and global regulators to bolster crypto adoption. Furthermore, the banks are advised to also assess the impact that such partnerships will have on their business.
Meanwhile, the report also mentioned how the regulatory environment will ultimately be impacted by digital assets and alternative data sources.
CBDCs: Support or Replacement for Fiat Currency?
Truly, CBDCs have the potential to either complement or replace the fiat currency. So in line with that potential, EY has warned banks to be wary of the impact it could have on their balance sheets.
Though EY admits that its a lot of work to gain regulatory clarity, the firm says:
“By understanding the broad direction of regulation, firms can take proactive steps to prepare for what’s coming.”
In a related news, the Central Bank of Bahrain (CBB) recently partnered with JPMorgan to pilot the country’s CBDC test.
In the trial which was completed just last week, CBB carried out digital payments using the blockchain of JPMorgan and crypto unit Onyx.
Speaking about the successful trial, CBB Governor Rasheed Al Maraj expressed his excitement. He added that the trial was important for Bahrain to address existing inadequacies in the traditional cross-border payments industry.
Read more:
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