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CBDC and banks: disintermediating fast and slow

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  • Rhys Bidder
  • Timothy Jackson
  • Matthias Rottner

Abstract

We examine the impact of a retail central bank digital currency, combining survey evidence from German households with a macroeconomic model featuring endogenous systemic bank runs. The survey reveals non-trivial demand for retail CBDC as a substitute for bank deposits in normal times ("slow disintermediation") and increased withdrawal risks during financial distress ("fast disintermediation"). Informed by the survey, the model indicates that introducing a retail CBDC might reduce financial stability because CBDC offers storage-at-scale - making it attractive to run to. We estimate an optimal holding limit which chokes off fast disintermediation and enhances financial stability by shrinking a fragile banking system.

Suggested Citation

  • Rhys Bidder & Timothy Jackson & Matthias Rottner, 2025. "CBDC and banks: disintermediating fast and slow," BIS Working Papers 1280, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1280
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    References listed on IDEAS

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    1. Eun Young Oh & Shuonan Zhang, 2022. "Informal economy and central bank digital currency," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1520-1539, October.
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    3. Toni Ahner & Katrin Assenmacher & Peter Hoffmann & Agnese Leonello & Cyril Monnet & Davide Porcellacchia, 2024. "The Economics of Central Bank Digital Currency," International Journal of Central Banking, International Journal of Central Banking, vol. 20(4), pages 221-274, October.
    4. Ahnert, Toni & Assenmacher, Katrin & Hoffmann, Peter & Leonello, Agnese & Monnet, Cyril & Porcellacchia, Davide, 2022. "Cold hard (digital) cash: the economics of central bank digital currency," Research Bulletin, European Central Bank, vol. 100.
    5. Li, Jiaqi, 2023. "Predicting the demand for central bank digital currency: A structural analysis with survey data," Journal of Monetary Economics, Elsevier, vol. 134(C), pages 73-85.
    6. Chiu, Jonathan & Keister, Todd, 2022. "The economics of digital currencies: Progress and open questions," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
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    Keywords

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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