Central bank digital currencies could drive 'fundamental shift' in banking sector: Philadelphia Fed paper

The Federal Reserve Bank of Philadelphia's research department has published a new working paper focused on central bank digital currencies, exploring the transformative implications for the make-up of the banking sector.

As noted in the abstract of the paper – entitled "Central Bank Digital Currency: Central Banking for All?" – a central bank's digital currency could make such an institution more attractive to depositors due to the perceived stability. The idea of a CBDC introducing a degree of competition in the banking system has been raised in the past, including in a December note by the IMF.

The Philadelphia Fed paper's authors remark that a CBDC "allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits," going on to note:

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