The general manager of the Bank for International Settlements (BIS), Agustin Carstens, has revealed that central banks are “not seeing the value” in issuing digital currencies.

In a speech given at the Central Bank of Ireland on Friday, Carstens said that a move to central bank digital currencies (CBDCs) could bring fundamental changes to the stability of the economy.

A study conducted by the Bank of Korea (BOK) in February also concluded that the issuance of a CBDC could have negative ramifications on the economy.

“This has negative effects on financial stability, which increases the likelihood of bank panic in which commercial banks are short of cash reserves to pay out to depositors,” the report states.

Carstens uttered similar thoughts in his speech, stating that the deposit and lending business would shift from commercial banks to central banks, producing a one-tier system.

Carstens stated: “There are historical instances of one-tier systems where the central bank did everything. In the socialist economies before the fall of the Berlin Wall, the central bank was also the commercial bank. But I do not think we can hold up that system as something that will serve customers better.”

Carstens also believes that it is “not far-fetched” to believe that CBDCs could have a premium over fiat currency in times of financial stress.

“It is not far-fetched to imagine that a premium would open up, where one euro of deposits in the commercial bank buys less than one euro’s worth of central bank digital currency,” Carstens said.

“So far, experiments have not shown that new technologies would work any better than existing ones. There is no clear demand for CBDCs on the part of society. There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system.”