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.

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. 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 cbdc monetary policy result to inform your calculation.

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