Treasury research argues that a CBDC would reduce threat of bank runs

Quick Take

  • Recent research from the Treasury’s Office of Financial research disputes the threat that a CBDC poses to commercial banks.
  • The publication comes amid intensifying political debate over a Fed-issued CBDC. 

New research disputes concerns that a central bank digital currency would endanger the traditional banking industry. 

The Treasury's Office of Financial Research published a paper on CBDCs and stability on July 12. The researchers argue that "the adjustments in private financial arrangements in response to a CBDC may tend to stabilize rather than destabilize the financial system."

The paper took aim at the concern that a CBDC would facilitate bank runs by incentivizing deposit holders to take their money out of banks. It's a common criticism of CBDCs. Many skeptics of CBDCs are generally fearful of the damage a direct digital link with the Federal Reserve would do to commercial banks. 

However, the authors don't do much to assuage concerns that a CBDC could become a tool of government surveillance. They indeed point to information that policymakers draw from CBDC outflows as a means of identifying a bank run more efficiently that current systems allow: 

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