April 2024

Financial Stability Implications of CBDC

Francesca Carapella, Jin-Wook Chang, Sebastian Infante, Melissa Leistra, Arazi Lubis, and Alexandros P. Vardoulakis


A Central Bank Digital Currency (CBDC) is a form of digital money that is denominated in the national unit of account and constitutes a direct liability of the central bank. We examine the financial stability risks and benefits of issuing a CBDC under different design options. Our analysis is based on lessons derived from historical case studies as well as on an analytical framework that allows us to characterize the mechanisms through which a CBDC can affect financial stability. We further discuss various policy tools that can be employed to mitigate financial stability risks.

Keywords: CBDC, financial stability, runs, stablecoins, central bank liabilities, regulation

DOI: https://doi.org/10.17016/FEDS.2024.021

PDF: Full Paper

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Last Update: April 12, 2024