Central bank digital currencies and financial stability: Addressing Economic Challenges Under Global Uncertainty

Alain Laurent ()
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Alain Laurent: CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes

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Abstract: This chapter aims to assess the extent to which central bank digital currencies (CBDCs) can be developed and used as a relevant way to achieve public policy objectives such as financial stability and stable financial support for innovative economic activities within the eco-transition process. CBDCs represent a major development in the global monetary landscape. By issuing digital currencies, central banks are seeking to modernize payment systems while retaining direct control over the money supply. Their influence on financial stability can be both positive and negative, depending on their design and implementation. On the one hand, CBDCs can strengthen financial stability by offering an alternative to private currencies and decentralized cryptocurrencies. They enable stricter regulation and better traceability of transactions, thereby reducing the risks of fraud and money laundering. In addition, they can facilitate cross-border payments, reducing transaction costs and the risks associated with currency fluctuations. CBDCs could also improve the efficiency of monetary policy by strengthening the different channels of monetary policy transmission, contributing then to the stable funding of the transition process along with the required innovations. However, they also present risks. The introduction of CBDCs could lead to a massive flight of traditional bank deposits into digital currency, which would reduce the ability of commercial banks to lend and could affect the liquidity of the banking system. In addition, the mere design of CBDCs could increase vulnerabilities of the payment system to cyber attacks.

Keywords: central bank digital currencies; financial stability; Ecological transition (search for similar items in EconPapers)
Date: 2026
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Published in Klapkiv Lyubov; Ülgen Faruk. Financial Stability, Risks, and Ecological Transition, Routledge, pp.19-27, 2026, 978-1-041-12184-8. ⟨10.4324/9781003663539-3⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05507417

DOI: 10.4324/9781003663539-3

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