<p>Because they are substitutes and they compete with each other. The more substitutes there are for a product the lower the market power of a producer of that product.</p>
<p>Today if you want to buy anything online (and in many countries even offline), you need bank account and credit/debit card. This gives banks some market power because paying in cash is no longer a viable option most of the time.  Once CBDC's are launched you can do all this with CBDC, like you can now do with bitcoin today except most stores won't take your bitcoin but they will have to take your CBDCs.</p>

CC BY-SA 4.0
2021-11-20T18:44:29.123Z
You mentioned Bitcoin. A CBDC is not necessarily a cryptocurrency.
H2ONaCl
CC BY-SA 4.0
2021-11-21T00:01:13.197Z
@H2ONaCl I never said it is. But CBSC's could function without commercial bank account **like** bitcoin
csilvia
CC BY-SA 4.0
2021-11-20T16:43:30.283Z
2021-11-20T16:43:30.283Z
csilvia
<p><a href="https://www.mendeley.com/catalogue/bab1888b-3b36-318e-8d21-153b5f0bd5e5/?utm_source=desktop&amp;utm_medium=1.19.8&amp;utm_campaign=open_catalog&amp;userDocumentId=%7B1ed7fa60-0df9-369d-85c4-5cf5cb034eea%7D" rel="nofollow noreferrer">Lannquist,2020, p.6</a> said that</p>
<blockquote>
<p>Retail CBDC Can challenge commercial banks’ market power over retail
deposits, pressuring banks to increase interest rates and offer better
financial services to depositors</p>
</blockquote>
<p><strong>I am wondering why retail CBDC can affect commercial banks' retail deposit</strong>. It seems not to be the case for me because depositing money to bank and get the interest is a better option than just keep the money in their digital account.</p>

CC BY-SA 4.0
2021-11-20T23:56:03.100Z
I would not assume all CBDCs will not pay interest, now and forever. This reference says it could be a negative or positive interest rate. https://bpi.com/the-benefits-and-costs-of-a-central-bank-digital-currency-for-monetary-policy/
H2ONaCl
CC BY-SA 4.0
2021-11-20T23:58:07.427Z
Thanks H2ONaCl, noted with much of thanks
Phil Nguyen
<risk><cbdc>
Why does Central Bank Digital Currency affect commercial banks' retail deposits?
Phil Nguyen
# Why does Central Bank Digital Currency affect commercial banks' retail deposits?

(Asked by: username_0 on 2021-11-20)

[Lannquist,2020, p.6](https://www.mendeley.com/catalogue/bab1888b-3b36-318e-8d21-153b5f0bd5e5/?utm_source=desktop&utm_medium=1.19.8&utm_campaign=open_catalog&userDocumentId=%7B1ed7fa60-0df9-369d-85c4-5cf5cb034eea%7D) said that

> Retail CBDC Can challenge commercial banks’ market power over retail
> deposits, pressuring banks to increase interest rates and offer better
> financial services to depositors

**I am wondering why retail CBDC can affect commercial banks' retail deposit**. It seems not to be the case for me because depositing money to bank and get the interest is a better option than just keep the money in their digital account.

**Tags:** risk, cbdc
> **Comments:**
> **username_1**: I would not assume all CBDCs will not pay interest, now and forever. This reference says it could be a negative or positive interest rate. https://bpi.com/the-benefits-and-costs-of-a-central-bank-digital-currency-for-monetary-policy/  
> **username_0**: Thanks H2ONaCl, noted with much of thanks  

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## 1 answers

### Answer by username_2 on 2021-11-20. Score: 3 | Accepted answer

Because they are substitutes and they compete with each other. The more substitutes there are for a product the lower the market power of a producer of that product.

Today if you want to buy anything online (and in many countries even offline), you need bank account and credit/debit card. This gives banks some market power because paying in cash is no longer a viable option most of the time. Once CBDC's are launched you can do all this with CBDC, like you can now do with bitcoin today except most stores won't take your bitcoin but they will have to take your CBDCs.

> **Comments:**
> **username_1**: You mentioned Bitcoin. A CBDC is not necessarily a cryptocurrency.  
> **username_2**: @H2ONaCl I never said it is. But CBSC's could function without commercial bank account **like** bitcoin  

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