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How would a Central Bank Digital Currency Affect Financial Stability?

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  • Todd Keister

Abstract

A well-designed central bank digital currency may enhance rather than weaken financial stability, according to an OFR working paper released in July. As central banks consider whether the benefits of creating digital cash outweigh the risks, the paper finds that at least one risk—bank runs—is not as big as initially feared.

Suggested Citation

  • Todd Keister, 2022. "How would a Central Bank Digital Currency Affect Financial Stability?," The OFR Blog 22-06, Office of Financial Research, US Department of the Treasury.
    • Handle: RePEc:ofr:ofrblg:22-06
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    File URL: https://www.financialresearch.gov/the-ofr-blog/2022/08/08/how-would-a-central-bank-digital-currency-affect-financial-stability/
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    Citations

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    Cited by:

    1. Abad, Jorge & Nuño, Galo & Thomas, Carlos, 2025. "CBDC and the operational framework of monetary policy," Journal of Monetary Economics, Elsevier, vol. 151(C).
    2. Makoto WATANABE & Tarishi Matsuoka, 2025. "Banking Crises and Central Bank Digital Currency in a Monetary Economy," CIGS Working Paper Series 25-015E, The Canon Institute for Global Studies.
    3. Elena D. Dzhaokhadze & Elena V. Sinelnikova-Muryleva, 2025. "Factors and Consequences of the Distribution of retail Central Banks Digital Currencies: Global Experience and Conclusions for the Digital Ruble," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 24(2), pages 685-713.
    4. Ahnert, Toni & Hoffmann, Peter & Monnet, Cyril, 2025. "Payments and privacy in the digital economy," Journal of Financial Economics, Elsevier, vol. 169(C).
    5. Ozili, Peterson K, 2025. "100 Quotes about central bank digital currencies," MPRA Paper 124263, University Library of Munich, Germany.
    6. Meng, Yuqun & Wu, Junxian & Tu, Yongqian, 2024. "Central bank digital currency, financial technology level and regional financial stability," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    7. Buzuriu Bogdan Cristian, 2024. "Central Bank Digital Currencies and Financial Stability: Literature Review and New Questions," Timisoara Journal of Economics and Business, Sciendo, vol. 17(1), pages 41-64.
    8. Huseyin Oguz Genc & Soichiro Takagi, 2024. "A literature review on the design and implementation of central bank digital currencies," International Journal of Economic Policy Studies, Springer, vol. 18(1), pages 197-225, February.
    9. Magin, Jana Anjali & Neyer, Ulrike & Stempel, Daniel, 2025. "Cash or Cache? Distributional and business cycle implications of CBDC holding limits," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 101(C).
    10. Christoph Wronka, 2023. "Central bank digital currencies (CBDCs) and their potential impact on traditional banking and monetary policy: an initial analysis," Digital Finance, Springer, vol. 5(3), pages 613-641, December.

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