Moody’s research sheds light on the impact of CBDCs on international trade 

Moody's research sheds light on the impact of CBDCs on international trade 

Moody’s report on CBDC implications on the global economy and international banking depicts the serious threats to banks’ profits after CBDC growth. The adoption of central bank digital currency could enhance the payment system and provide a faster way to transfer funds from one country to another. 

On 21 March, Moody released a report citing the implications of central bank digital currency on the banking sector and in the trade of commodities. In the same report, it was mentioned that in domestic transactions the banks have intermediary roles but in international trade, the role of the bank will subsequently get reduced as this requires different infrastructure to work on. 

Banks will witness more benefits from the CBDC-based payment system. Several problems like payment stuck, payment failure, and hacking can be reduced. There are also some negative impacts on the banks like they will get fewer profits as compared to the traditional system. The role of correspondent banks could be removed permanently in the future and with this profit will be impacted. 

Moody is famous for providing credit ratings to bonds. The research of Moody helps stakeholders in identifying the potential risk associated with bonds. In January 2023, a report released by Moody informed about the reduced long-term credit ratings of Coinbase. In the report, it was mentioned that Coinbase’s capacity to generate revenue and cash flow was significantly reduced.  

The banks also need to redesign their operational infrastructure to embrace new technology. To adopt new networks and infrastructure banks will have to bear more financial burden on their heads. However, they are only short-term burdens because, in the long run, they will help out the banks. 

The adoption of CBDC needs anti-money laundering and privacy laws to protect the interest of stakeholders. According to the report, the acceptance of central bank digital currency is not global because the players who are currently flourishing under existing frameworks don’t want to adopt this new technology. It is not the first report which shows the impact of CBDC on the economy. The report released by the United States treasury mentioned the negative impacts of CBDC adoption on banks and households.

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