According to a recent working paper by the European Central Bank (ECB), introducing a central bank digital currency (CBDC) as a store of value could increase the risk of bank disintermediation since customers might be driven to switch their deposits for digital currency. But the impact is less than might be thought. The appropriate calibration of certain design CBDC features will mitigate some of these effects.
In Europe, a large proportion of cash is held as a store of value, in contrast to the digital euro’s intention to function primarily as a payment tool. Historically, uncertainty about bank stability has largely driven the demand for public money as a safe liquid asset. However, evidence shows that only a fraction of consumers hold money outside bank accounts for these purposes. Most people keep their savings as bank deposits and use cash as a means of payment.
But even if a digital euro is introduced for transaction purposes, it might also attract people as a potential store of value. For example, individuals could switch their cash holdings for a safe digital asset or replace their bank deposits with CBDCs. These scenarios could have negative implications for the proportion of the population that hold public money as a store of value, as well as for banking sector stability.
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