How could a retail CBDC affect commercial bank deposits?

If CBDC pays interest at or above deposit rates, households may shift deposits from commercial banks to CBDC, causing bank disintermediation. A USD 1 trillion deposit outflow from US banks would shrink bank balance sheets, raise lending rates, and tighten financial conditions. Most CBDC designs include holding limits (e.g., EUR 3,000 per citizen) to mitigate this risk.

Can CBDC implement negative interest rates more effectively?

A programmable CBDC could implement deeply negative rates without the cash-hoarding escape that limits negative rates to approximately -0.5% in traditional systems. This gives central banks greater deflationary-shock tools but raises profound issues of financial repression, wealth redistribution, and public trust in central bank money.

Central Bank Digital Currency Monetary Transmission

Analyze how retail CBDC design choices (remunerated vs. unremunerated, holding limits, programmable money) affect monetary policy transmission, bank disintermediation risk, and deposit flight scenarios.

Use the full interactive calculator below, or

Related Calculators

CBDC Settlement

Finance Long-tail

Dollarization Analysis

Finance Long-tail

Central Bank Digital Currency Monetary Transmission

Related Calculators

Frequently Asked Questions

How could a retail CBDC affect commercial bank deposits?

Can CBDC implement negative interest rates more effectively?