Bitcoin Electronic Crypto Currency Exchange Concept Illustration

Central banks that are looking at issuing their own digital currencies (a.k.a cryptocurrencies) should beware of the possible implications for payments systems, monetary policy, and financial stability, warns a report published Tuesday from the Bank for International Settlements (BIS).

Although blockchain technology has the potential to improve wholesale payments, clearing and settlements, according to the report, it also cautions central banks about the possible effects of issuing digital currencies for day-to-day retail use.

Policymakers are concerned about the impact of a digital currency that’s intended for use by the general public, which, the report says, “could have wide-ranging implications for banks and the financial system.”

“Commercial banks’ reliance on customer deposits may become less stable, as deposits could more easily take flight to the central bank in times of stress. Besides consequences for financial stability, effects on the efficiency of financial intermediation need to be carefully considered,” the report says.

The report is more open to the idea of a digital currency for use in wholesale markets, but finds that more work needs to be done to assess its potential.

“Central bank digital currencies could help make settling trades of securities and foreign exchange more efficient in the future. But more work and experimentation would be needed to explore these benefits,” says Benoît Coeuré, chairman of the BIS Committee on Payments and Market Infrastructures (CPMI), in a statement. The CPMI co-authored the report along with the BIS Markets Committee.

Mark Carney, chairman of the BIS Global Economy Meeting, the Financial Stability Board, and the Bank of England, called the report “an important contribution” to the G20’s discussion of digital currencies.

“Technological developments have raised questions about the feasibility and desirability of combining distributed ledger technology with the trust inherent in fiat currencies to create a central bank digital currency available to all. As set out in this report, the policy issues that this would raise, for central banks and society more generally, need careful consideration. A more immediate priority is how to use these new technologies to meet the current demand for fully reliable, real-time payments,” Carney says in a statement.