Home » Altcoin CBDCs and stablecoins: EY advises banks to ‘prepare for what’s coming’ Altcoin Reading 2 min Views 3 A new report from EY highlights the need for a policy change for banks to overcome business uncertainties regarding digital assets. Big Four accounting firm Ernst & Young has recommended that banks should change their regulatory perimeter to address the oncoming launches of state-backed central bank digital currencies (CBDC) and private stablecoins. EY’s “2022 Global Regulatory Outlook” highlighted the need for a policy change that can help financial services firms overcome business uncertainties amid mainstreaming of digital assets and cryptocurrency. While acknowledging the uncertainty regarding the digital assets market, the report states: “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.” EY recommended banking firms collaborate with regional and national regulators to foresee possible crypto adoption and proactively assess its impact on their business. The report also identified digitalization — alternative data sources and digital assets — as a potential factor to impact the regulatory environment: “The macroprudential or international implications of a major currency having a retail coin could be very significant for retail banks and the dollarization of smaller economies. For that reason, most central banks are likely to pursue a wholesale version.” Highlighting the potential of CBDCs to complement or replace fiat currency, EY warns banks to think about the implications for their balance sheets amid the possible interaction between CBDCs and stablecoins. Conceding the difficulty in gaining regulatory clarity, EY concluded: “By understanding the broad direction of regulation, firms can take proactive steps to prepare for what’s coming.” Just last week, the Central Bank of Bahrain (CBB) collaborated with American investment bank JPMorgan to pilot the country’s CBDC test. As Cointelegraph reported, the CBB completed a digital payments test using JPMorgan’s blockchain and cryptocurrency unit Onyx. Citing the development, CBB governor Rasheed Al Maraj said that the trial has been crucial for the Bahrainian government to address and potentially eliminate existing inefficiencies in the traditional cross-border payments industry.