Central bank digital currencies (Central Bank, Digital Currency (CBDC)s) could contribute to financial instability, a Federal Reserve working paper finds.
Francesca Carapella et al examine several ways Central Bank, Digital Currency (CBDC)s could create instability, and how central banks could mitigate this, in Financial Stability Implications of Central Bank, Digital Currency (CBDC). They note several ways in which a Central Bank, Digital Currency (CBDC) might make the economy less stable.
A Central Bank, Digital Currency (CBDC)’s safe asset status could increase the chance of a flight to it from other asset cases during market instability, they say. A Central Bank, Digital Currency (CBDC) that was widely available, interoperable, with a fast payment infrastructure could “dramatically reduce” switching costs from deposits and money-market instruments, accelerating bank runs.
To read the full article, visit centralbanking.com.
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