![coins-1726618_1280 (1).jpg](https://cdn.steemitimages.com/DQmWLBPLGcX6tCF9BRofqdmQFXbRWWxmEzqTsHyburKcK5P/coins-1726618_1280%20(1).jpg) [Source](https://pixabay.com/photos/coins-banknotes-money-currency-1726618/) Like many who would come across and go through this post of mine,nI too just found out and learnt about the digital currency of the central bank as I was reading up and making research for this post, and honestly, the introduction of digital currency by the central bank shows innovation and advancement on the part of the traditional financial system. The central bank is basically a centralized based public financial institution that is responsible for managing the currency of a country therefore, the digital currency of the central bank or the central bank digital currency is form of a country's currency or fiat currency and the introduction of this digital currency by the central will come with both advantages and disadvantages as we will soon come to see. In this post of mine, I am going to be explaining, analyzing and discussing some of the possible and potential effects and impacts whether advantageous or disadvantageous that the central bank digital currency will have on commercial banks worldwide. |AFFECTS THE PROFITABILITY OF COMMERCIAL BANKS| |--| The first factor that I will be considering in this post is profitability and how the introduction of the central bank digital currency will affect the profitability of commercial banks, with the introduction of digital fiat currency simply means that users and customers reliance on deposit accounts and physical payment services would reduce which will cause banks to loose a source of income in that aspect. Fortunately, the introduction of the central bank digital currency has both advantageous and disadvantageous impacts and the previous paragraph shows the negative or disadvantageous impact of the central bank digital currency on the commercial bank, below is the advantageous impact. The positive impact of the introduction of the central bank digital currency is that with the proper adjustments it creates a new source of income and opportunity to make money or revenue for the different commercial banks. |OFFERS REGULATORY AND COMPLIANCE CHALLENGES| |--| ![money-7881948_1280.webp](https://cdn.steemitimages.com/DQmcWGwgeEbC9NxncaY9P5kguLJB7oJ4MgKuX3MGWscHDPJ/money-7881948_1280.webp) [Source](https://pixabay.com/photos/money-cash-dollars-finance-7881948/) With the introduction of the central bank digital currency will come or lead to the introduction of new regulatory guidelines that will help facilitate the smooth and effective operation of the unprecedented central bank digital currency however, there's no telling how these new guidelines and regulations will affect the commercial banks. The introduction and implementation of new regulatory guidelines are sure to create a challenge for commercial banks and probably lead to financial losses and loss of users like take for example the regulatory guideline issued by the central bank of Nigeria for all users to link their NIN and BVN to banking apps like **Opay and the rest** it led to loss of customers and financial cost in implementing and enforcing the law. |AFFECTS FINANCIAL STABILITY| |--| Another impact of the central bank digital currency on commercial banks is basically that the introduction of the central bank digital currency has the potential to affect the stability of the financial system of the country which like I mentioned before can be both positive or nagative, advantageous and disadvantageous impacts. Well the positive impact of the central bank digital currency on the financial stability of a country and on the different commercial banks is that it would help to facilitate and enhancement of the amount of people who are able to own accounts and carryout financial transactions and as a result beneficial to the banks. However, here is the negative impact of the introduction of the central bank digital currency and it is that it could lead to a sudden and large scale or voluminous shift of funds from commercial banks or the physical fiat currency to the central bank digital currency which will basically cause and create liquidity challenges for banks and financial instability. |FACILITATES INNOVATION AND INCREASES COMPETITION| |--| Lastly, the introduction of the central bank digital currency has the potential to cause and lead to competition which will indirectly lead to the innovation of the financial sector as a whole, I mean with access to the central bank digital currency commercial banks are sure to strive to increase the financial services they offer and as result creating new innovative financial services such as digital wallets with advanced features and security. Additionally, the introduction and creation of the central bank digital currency would basically make it possible so that there would be a lower barrier for entry and making it easier for finance based technological companies and other non bank financial institutions to help facilitate the growth and improvement of the traditional financial sector and probably give them a chance to be like cryptocurrencies. ![piggy-bank-970340_1280.jpg](https://cdn.steemitimages.com/DQmXzF4qnph8zoQK6WnZ4k8ooEskKNTzSZg833tK76T9F1N/piggy-bank-970340_1280.jpg) [Source](https://pixabay.com/photos/piggy-bank-money-savings-financial-970340/) |CONCLUSION| |--| In conclusion, permit me to use this opportunity to give thanks and show my appreciation to this great community and to all of my fellow steemians and steemit users who created time, and made the effort to read and go through this post which I have made, and I hope that you have been able to learn a thing or two, as I judiciously explained and discussed four of the impacts of the central bank digital currency on commercial banks.