Retail CBDC purposes and risk transfers to the central bank

Romain Baeriswyl, Samuel Reynard and Alexandre Swoboda

No 2021-19, Working Papers from Swiss National Bank

Abstract: The issuance of retail central bank digital currency (CBDC) entails a transfer of risk from commercial banks to the central bank. While this paper does not provide an overall assessment on whether or not to issue a retail CBDC, it analyzes how different mechanisms to limit the risk transfer, such as an unattractive interest rate on retail CBDC, a quantity ceiling or preventing convertibility of cash and reserves into CBDC, have different effects on the ability of retail CBDC to fulfil its intended purposes. In particular, these mechanisms hinder the use of CBDC as a medium of exchange. Specific aspects of demand and challenges related to a potential retail CBDC in Switzerland, namely, a small open economy with a safe-haven currency and a low level of government debt, are discussed.

Keywords: Retail; central; bank; digital; currency (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-mac, nep-mon and nep-pay
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Journal Article: Retail CBDC purposes and risk transfers to the central bank (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2021-19

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