JP Morgan strategist Josh Younger has penned a piece warning that central bank digital currencies (CBDC) need to be designed to avoid disintermediating commercial banks, Bloomberg reports. The topic is one of the key challenges in a retail CBDC design and is widely recognized as a risk.
YoYounger put a figure on the risk saying it could lead to the loss of 20%-30% of the funding base of commercial banks. And that shift could be rapid in a crisis, another issue that central banks acknowledge.
Much depends on whether the CBDC holdings will be limited. For example, if a key purpose of the CBDC is financial inclusion and the target is mainly low-income households who typically have less than $1,000 in their accounts, the impact would not be material.
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