The Institute of International Finance (IIF) has published a paper on Central Bank Digital Currencies (CBDCs) and Asymmetric Disintermediation. While reminding the potential models for the form of CBDC, the IIF focuses its attention on the ability of retail (or corporate) customers to access and use a CBDC, whether doing it directly or via an intermediary. A citizen having the opportunity to deposit their savings directly at the central bank could exacerbate a bank run during periods of instability.

Policy questions arising from this consideration:
– are central banks prepared to manage an increased liability of citizens’ savings?
– would the ability of citizens to switch create an added volatility in the money supply that central banks would have to manage? Would this impact monetary policy effectiveness?
– how would constraints on maturity transformation and fractional reserve banking affect the money supply, as well as the cost of and availability of credit?
– if commercial banks’ deposits contract, but society wishes for them to continue to take the commercial risk and lend to the economy, what is the mechanism for the central bank to transmit those funds back to the banks?

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