Central bank digital currencies: Potential risks and benefits

A growing activity has recently been watched in the sphere of central bank digital currencies (CBDC) creation, dictated by the desire of monetary authorities to increase the efficiency of payment systems and create an alternative to stablecoin projects like Libra. The paper discusses various types of CBCDs. Special attention is paid to potential risks and benefits associated with the emission of CBDCs, as well as their consequences for the banking sector and monetary policy. The first important issue associated with CBDC emission is the potential reduction of the role of the traditional banking system. The second issue is the change in the functioning of the monetary transmission channels as a result of the CBDCs emission. The third problem arises from the fact that in the event of a crisis some economic agents will prefer to transfer their funds from commercial banks to the CBDCs because they are less risky. This situation is expected to lead to instability of balances on deposit accounts in commercial banks. The problems listed are closely interrelated, and the significance and balance of risks and benefits associated with CBDCs emission are not completely obvious. At the same time CBDCs have a potential to become a new effective tool of monetary authorities in case of their proper design.