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Central Bank Digital Currencies and the Transformation of Endogenous Money Creation

Author

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  • Jalal Qanas
  • Malcolm Sawyer

Abstract

The potential introduction of central bank digital currencies (CBDCs) poses significant questions regarding the dynamics of endogenous money creation and the future role of commercial banks. Adopting a circuitist perspective, this article analyzes how publicly accessible CBDCs could reshape established monetary circuits. We examine the potential for significant bank disintermediation as funds shift to CBDCs, exploring plausible strategic responses from commercial banks, including service differentiation or withdrawal from basic payments. The analysis explores the complex implications for monetary policy effectiveness and financial stability, considering both potential benefits (e.g., enhanced policy transmission) and risks (e.g., accelerated bank runs, constrained credit creation). While CBDCs offer opportunities for financial inclusion, we also note significant practical barriers. Finally, the article assesses, within the circuitist framework, whether CBDCs are likely to function primarily as tools for direct government financing or remain intrinsically linked to the existing private credit creation mechanisms mediated by banks.

Suggested Citation

  • Jalal Qanas & Malcolm Sawyer, 2026. "Central Bank Digital Currencies and the Transformation of Endogenous Money Creation," International Journal of Political Economy, Taylor & Francis Journals, vol. 55(1), pages 5-19, January.
    • Handle: RePEc:mes:ijpoec:v:55:y:2026:i:1:p:5-19
    DOI: 10.1080/08911916.2026.2621553
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