Could the Issuance of CBDC Reduce the Likelihood of Banking Panic?1

Souissi, Soraya Ben; Nabi, Mahmoud Sami

doi:10.2478/jcbtp-2023-0015

Abstract

This paper delves into the relationship between the issuance of Central Bank Digital Currencies (CBDC) and the likelihood of banking panic. The issuance of CBDC acts as a disturbing shock that incentivizes depositors to withdraw all/part of their deposits from the commercial banks, to swap it for CBDC which are offered by the central bank. We determine a variety of tools that central banks can use in order for the issuance of CBDC to act as a stabilizing factor of the banking system (by reducing the likelihood of banking panic).

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Could the Issuance of CBDC Reduce the Likelihood of Banking Panic?1

Abstract

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