Central Bank Digital Currency: Will Banks Survive?


Will an introduction of CBDC cause disintermediation? I provide empirical and theoretical evidence that CBDC will not necessarily crowd out bank deposits. In economies with significant demand for currency, non-interest-bearing CBDC is likely to lead instead to an inflow of deposits caused by cash substitution. Banks then lower deposit rates and lend more. Similarly, banks will not contract lending if CBDC is intermediated even if they experience an outflow of deposits. Finally, I show that CBDC can lead to disintermediation when it is interest-bearing.

Sergey Sarkisyan
Sergey Sarkisyan
Ph.D. Candidate in Finance

My research interests include financial intermediation, debt markets, and monetary policy