In normal times, the risk of disintermediation from introducing a central bank digital currency (CBDC) “may be overstated”, according to Carolyn Wilkins, an external member of the Financial Policy Committee at the Bank of England. However, “the concern is real when it comes to times of stress,” she said. Many people are worried about CBDCs’ impact on banks (particularly smaller ones) and the possibility of massive deposit flights during crises. So what can central bankers do about it?
Speaking at the OMFIF Digital Money Symposium, Ms. Wilkins honed in on some of the familiar concerns around CBDCs. “There are understandably worries about ‘mission creep’,” she noted, dispelling exaggerated warnings related to privacy, programmability, and monetary policy.
Yet the senior economist says central bankers should keep financial stability risks in mind when thinking about the economic and technical design of a CBDC, particularly around the possibility of bank disintermediation. “Runs against different forms of money are likely to continue to happen, and they could become worse as technology evolves,” she argues. The recent fall of SVB bank is a case in point.
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