Central Bank Digital Currency: Stability and Information

Todd Keister and Cyril Monnet

No 22-04, Working Papers from Office of Financial Research, US Department of the Treasury

Abstract: One often cited concern about central bank digital currency (CBDC) is that it could make runs on banks and other financial intermediaries more common. This working paper identifies two ways a CBDC may enhance rather than weaken financial stability. First, banks do less maturity transformation when depositors have access to CBDC, reducing their exposure to depositor runs. Second, monitoring the flow of funds into CBDC allows policymakers to react more quickly to periods of stress, which lessens the incentive for depositors and other short-term creditors to withdraw assets (Working Paper no. 22-04).

Date: 2022-07-11
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Journal Article: Central bank digital currency: Stability and information (2022)
Working Paper: Central Bank Digital Currency: Stability and Information (2022)
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