Financial Stability Implications of CBDC

RePEc Short ID: pch1937
ORCID iD: 0000-0001-8628-2085

Carapella, Francesca; Chang, Jin-Wook; Infante, Sebastian; Leistra, Melissa; Lubis, Arazi; Vardoulakis, Alexandros

doi:10.17016/FEDS.2024.021

Working Paper

Financial Stability Implications of CBDC

Abstract: A Central Bank Digital Currency (CBDC) is a form of digital money that is denominated in the national unit of account, constitutes a direct liability of the central bank, and can be distinguished from other central bank liabilities. We examine the positive and negative implications for financial stability of a CBDC under different design options. We base our analysis on the lessons derived from historical case studies as well as on analytical frameworks useful to characterize the mechanisms through which a CBDC can affect financial stability. We further discuss various policy tools that can be employed to mitigate financial stability risks.

Keywords: CBDC; Financial stability; Runs; Stablecoins; Central bank liabilities; Regulation;

JEL Classification: E40; E50; G01; G21; G23; G28;

https://doi.org/10.17016/FEDS.2024.021