CBDC features will have financial stability effects – Fed paper

How a central bank digital currency (CBDC) is designed will have significant effects on financial stability and banking disintermediation, research from the Federal Reserve Board argues.

CBDCs should be designed with ceilings to holdings and transactions, say Sebastian Infante, Kyungmin Kim, Anna Orlik, André Silva and Robert Tetlow.

The effect of a retail CBDC on banking in normal times, say the authors, is ambiguous. They recommend tiered remuneration, individual and aggregate usage caps