<p>There is good summary (with references) of the benefits of CBDCs on <a href="https://en.wikipedia.org/wiki/Central_bank_digital_currency#Benefits_and_impacts" rel="nofollow noreferrer">Wikipedia</a>.</p>
<p>With respect to banking sector disruption see <a href="https://www.riksbank.se/globalassets/media/rapporter/pov/artiklar/engelska/2018/181105/20183-when-a-central-bank-digital-currency-meets-private-money---effects-of-an-e-krona-on-banks.pdf" rel="nofollow noreferrer">this</a> 2018 report by the Sveriges Riksbank. It finds that</p>
<blockquote>
<p>while a given outflow of retail deposits into e-krona
reduces banks’ liquidity portfolios and worsens their funding
profiles, banks can normally control this outflow via deposit rates.
Banks can also issue more market funding to restore their liquidity
and funding profiles.</p>
</blockquote>
<p>That said,</p>
<blockquote>
<p>The exact features of an e-krona can, however, be controlled by the
policy maker. In sum, we do not find any decisive argument against the
issuance of an e-krona when studying financial stability effects on
banks.</p>
</blockquote>

CC BY-SA 4.0
2021-05-10T01:02:00.713Z
If people stop making deposits at commercial banks then the banks will have to use longer term funding. Then there will not be failures due to  sudden bank runs.
H2ONaCl
CC BY-SA 4.0
2021-01-24T23:50:25.620Z
2021-01-24T23:50:25.620Z
sba222
<p>Credit cards charge merchants a percentage. Bank accounts might have a periodic account maintenance charge. Money remittance companies charge a fee and presumably half the currency bid-ask spread. Existing cryptocurrencies create scarcity in a way that produces pollution if the electrical generators use natural gas and coal. If an alternative eliminates some of these frictions or pollution then that is a benefit to the economy.</p>
<p>If everybody can send everybody money in a large scale system the costs will be very low per transaction. If the central bank creates a system for all the residents of a country then it should try to have more users than the competition. If it has very few users then it should not be created. If the central bank uses cryptography it should be used for security, not to create scarcity because we should avoid the pollution.</p>

CC BY-SA 4.0
2021-02-24T21:19:09.130Z
2021-02-24T21:19:09.130Z
H2ONaCl
<p>The function of a bank is to take in assets and create loans.</p>
<p>If a bank doesn't have as many assets, especially money, it can't create as many loans.</p>
<p>One major way that banks get assets is when people give them their money for safe-keeping.</p>
<p>If people didn't need to give their money to banks for safe-keeping, banks would have a lot less money. Therefore, they couldn't create as many loans. Therefore, it would be harder to get a loan.</p>

CC BY-SA 4.0
2020-09-07T18:29:34.410Z
2020-09-07T18:29:34.410Z
Criticize SE actions means ban
<p>I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy?</p>
<p>Someone who works at a Central Bank explained to me, that by holding the a currency in your own crypto wallet, and not not as a deposit in a commercial bank, the commercial bank's balance sheet would shrink significantly. By shrinking, it could lend out less money with higher interest rates, and could disrupt the complex commercial banking system in a bad way.</p>

CC BY-SA 4.0
2020-09-04T06:05:49.950Z
It would be to know what you mean by CBDC, since the term is very broad. Would it be available to the public (i.e. retail CBDC)? If so, would the people be able to have an account with the central bank? Would that account pay interest?
Art
CC BY-SA 4.0
2020-09-04T15:48:45.967Z
Makes sense to me: it would be like holding cash. Nobody holds \$50000 cash, they put it in a bank so nobody can steal it. But you could easily have \$50000 of CBDC, without putting it in a bank. This would give a lot less power to banks because less people would give banks money. Right now, you give the bank money because it's the default option.
Criticize SE actions means ban
<monetary-policy><banking><central-banking><money><cryptocurrency>
Why would a CBDC (Central Bank Digital Currency) be good for the economy?
curiousTrader
# Why would a CBDC (Central Bank Digital Currency) be good for the economy?

(Asked by: username_0 on 2020-09-03)

I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy?

Someone who works at a Central Bank explained to me, that by holding the a currency in your own crypto wallet, and not not as a deposit in a commercial bank, the commercial bank's balance sheet would shrink significantly. By shrinking, it could lend out less money with higher interest rates, and could disrupt the complex commercial banking system in a bad way.

**Tags:** monetary-policy, banking, central-banking, money, cryptocurrency
> **Comments:**
> **username_1**: It would be to know what you mean by CBDC, since the term is very broad. Would it be available to the public (i.e. retail CBDC)? If so, would the people be able to have an account with the central bank? Would that account pay interest?  
> **username_2**: Makes sense to me: it would be like holding cash. Nobody holds \$50000 cash, they put it in a bank so nobody can steal it. But you could easily have \$50000 of CBDC, without putting it in a bank. This would give a lot less power to banks because less people would give banks money. Right now, you give the bank money because it's the default option.  

---

## 3 answers

### Answer by username_3 on 2021-01-24. Score: 2

There is good summary (with references) of the benefits of CBDCs on [Wikipedia](https://en.wikipedia.org/wiki/Central_bank_digital_currency#Benefits_and_impacts).

With respect to banking sector disruption see [this](https://www.riksbank.se/globalassets/media/rapporter/pov/artiklar/engelska/2018/181105/20183-when-a-central-bank-digital-currency-meets-private-money---effects-of-an-e-krona-on-banks.pdf) 2018 report by the Sveriges Riksbank. It finds that

> while a given outflow of retail deposits into e-krona
> reduces banks’ liquidity portfolios and worsens their funding
> profiles, banks can normally control this outflow via deposit rates.
> Banks can also issue more market funding to restore their liquidity
> and funding profiles.

That said,

> The exact features of an e-krona can, however, be controlled by the
> policy maker. In sum, we do not find any decisive argument against the
> issuance of an e-krona when studying financial stability effects on
> banks.

> **Comments:**
> **username_4**: If people stop making deposits at commercial banks then the banks will have to use longer term funding. Then there will not be failures due to  sudden bank runs.  

---

### Answer by username_4 on 2021-02-24. Score: 0

Credit cards charge merchants a percentage. Bank accounts might have a periodic account maintenance charge. Money remittance companies charge a fee and presumably half the currency bid-ask spread. Existing cryptocurrencies create scarcity in a way that produces pollution if the electrical generators use natural gas and coal. If an alternative eliminates some of these frictions or pollution then that is a benefit to the economy.

If everybody can send everybody money in a large scale system the costs will be very low per transaction. If the central bank creates a system for all the residents of a country then it should try to have more users than the competition. If it has very few users then it should not be created. If the central bank uses cryptography it should be used for security, not to create scarcity because we should avoid the pollution.


---

### Answer by username_2 on 2020-09-07. Score: -1

The function of a bank is to take in assets and create loans.

If a bank doesn't have as many assets, especially money, it can't create as many loans.

One major way that banks get assets is when people give them their money for safe-keeping.

If people didn't need to give their money to banks for safe-keeping, banks would have a lot less money. Therefore, they couldn't create as many loans. Therefore, it would be harder to get a loan.


---

