I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy?

Someone who works at a Central Bank explained to me, that by holding the a currency in your own crypto wallet, and not not as a deposit in a commercial bank, the commercial bank's balance sheet would shrink significantly. By shrinking, it could lend out less money with higher interest rates, and could disrupt the complex commercial banking system in a bad way.

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    $\begingroup$ It would be to know what you mean by CBDC, since the term is very broad. Would it be available to the public (i.e. retail CBDC)? If so, would the people be able to have an account with the central bank? Would that account pay interest? $\endgroup$
    – Art
    Commented Sep 4, 2020 at 6:05
  • $\begingroup$ Makes sense to me: it would be like holding cash. Nobody holds \$50000 cash, they put it in a bank so nobody can steal it. But you could easily have \$50000 of CBDC, without putting it in a bank. This would give a lot less power to banks because less people would give banks money. Right now, you give the bank money because it's the default option. $\endgroup$ Commented Sep 4, 2020 at 15:48

3 Answers 3


There is good summary (with references) of the benefits of CBDCs on Wikipedia.

With respect to banking sector disruption see this 2018 report by the Sveriges Riksbank. It finds that

while a given outflow of retail deposits into e-krona reduces banks’ liquidity portfolios and worsens their funding profiles, banks can normally control this outflow via deposit rates. Banks can also issue more market funding to restore their liquidity and funding profiles.

That said,

The exact features of an e-krona can, however, be controlled by the policy maker. In sum, we do not find any decisive argument against the issuance of an e-krona when studying financial stability effects on banks.

  • $\begingroup$ If people stop making deposits at commercial banks then the banks will have to use longer term funding. Then there will not be failures due to sudden bank runs. $\endgroup$
    – H2ONaCl
    Commented May 10, 2021 at 1:02

Credit cards charge merchants a percentage. Bank accounts might have a periodic account maintenance charge. Money remittance companies charge a fee and presumably half the currency bid-ask spread. Existing cryptocurrencies create scarcity in a way that produces pollution if the electrical generators use natural gas and coal. If an alternative eliminates some of these frictions or pollution then that is a benefit to the economy.

If everybody can send everybody money in a large scale system the costs will be very low per transaction. If the central bank creates a system for all the residents of a country then it should try to have more users than the competition. If it has very few users then it should not be created. If the central bank uses cryptography it should be used for security, not to create scarcity because we should avoid the pollution.


The function of a bank is to take in assets and create loans.

If a bank doesn't have as many assets, especially money, it can't create as many loans.

One major way that banks get assets is when people give them their money for safe-keeping.

If people didn't need to give their money to banks for safe-keeping, banks would have a lot less money. Therefore, they couldn't create as many loans. Therefore, it would be harder to get a loan.


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