Central bank digital currencies (CBDCs) could contribute to financial instability, a Federal Reserve working paper finds

Central bank digital currencies (CBDCs) could contribute to financial instability, a Federal Reserve working paper finds

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Central bank digital currencies (CBDCs) could contribute to financial instability, a Federal Reserve working paper finds

A CBDC’s safer asset status, relative to private liabilities of the financial sector, may increase the financial sector’s vulnerability to destabilizing runs in times of stress, the authors say. A CBDC may also weaken financial stability by reducing the ability of banks to extend credit during times of stress and competition with private stablecoins may affect financial stability.

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