JPMorgan Chase analyst Josh Young said that banks represent the commercial and financial infrastructure of all specific economies, and therefore should not be threatened by the development of central bank digital currencies that will gradually eliminate them.

In a report last Thursday, Young pointed out that by introducing CBDC as a new retail loan and payment channel, it has great potential to solve the existing problem of economic inequality.

However, he also said that the development of CBDC should be careful not to damage the existing banking infrastructure, because this will result in the destruction of 20% to 30% of the capital base directly from commercial bank investment.
The share of CBDC in the retail market will be smaller than that of banks. JPMorgan Chase said that although CBDC will be able to further accelerate financial inclusion than banks, they can still do so without severely disrupting the structure of the monetary system. The reason behind this is that, Most people who benefit the most from CBDC have accounts of less than $10,000.

Young said that these funds accounted for only a small part of the total financing, which means that the bank will still hold most of the shares.

“If all these deposits only hold retail CBDC, it will not have a substantial impact on bank financing.”

According to the latest survey by the Federal Deposit Insurance Corporation (FDIC) on unbanked and under-utilized households, more than 6% of American households (14.1 million American adults) do not use banking services.

The survey also pointed out that although the unemployment rate has been declining, the proportion of communities still facing systemic injustice and income inequality is still high. These are the main groups that benefit from CBDC.

“For example, black (16.9%) and Hispanic (14%) households are five times more likely to cancel bank deposits than white households (3%). For those without bank deposits, the most powerful indicator is income level.”

Conditional CBDC. Even in developing countries, financial inclusion is the main selling point of Crypto and CBDC. In May of this year, Federal Reserve Governor Lael Brainard stated that financial inclusion will be an important factor for the United States to consider CBDC. He added that Atlanta and Cleveland are both developing early research projects on digital currencies.

In order to ensure that the CBDC does not affect the bank’s infrastructure, JP Morgan Chase proposes to set a hard cap for low-income households:

“The hard cap of $2500 is likely to meet the needs of the vast majority of low-income households, without any significant impact on the financing matrix of large commercial banks.”

Young believes that this will be necessary to ensure that CBDC is still mainly used for retail.

“To reduce the utility of retail CBDC as a store of value, certain restrictions on the assets held need to be imposed.”

Recently, Weiss Crypto Rating called on the Crypto community to report on various CBDC development projects around the world, pointing out that this made people mistakenly believe that CBDC and Crypto have the same financial independence.

“Crypto media reported that all developments related to CBDC are related to “Crypto”, which is causing real harm to the industry because it is giving people the impression that CBDC is equivalent to Bitcoin, and the reality is that these two It’s nothing the same.”