Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Romain Baeriswyl
Author-Name-First: Romain
Author-Name-Last: Baeriswyl
Author-Person: pba446
Author-Name: Dr. Samuel Reynard
Author-Name-First: Samuel
Author-Name-Last: Reynard
Author-Person: pre151
Author-Name: Alexandre Swoboda
Author-Name-First: Alexandre
Author-Name-Last: Swoboda
Title: Retail CBDC purposes and risk transfers to the central bank
Abstract: The issuance of retail central bank digital currency (CBDC) entails a transfer of risk from commercial banks to the central bank. While this paper does not provide an overall assessment on whether or not to issue a retail CBDC, it analyzes how different mechanisms to limit the risk transfer, such as an unattractive interest rate on retail CBDC, a quantity ceiling or preventing convertibility of cash and reserves into CBDC, have different effects on the ability of retail CBDC to fulfil its intended purposes. In particular, these mechanisms hinder the use of CBDC as a medium of exchange. Specific aspects of demand and challenges related to a potential retail CBDC in Switzerland, namely, a small open economy with a safe-haven currency and a low level of government debt, are discussed.
Length: 25 pages
Creation-Date: 2021
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2021/working_paper_2021_19
File-Format: text/html
Number: 2021-19
Classification-JEL: E42, E52, E58
Keywords: Retail central bank digital currency
Handle: RePEc:snb:snbwpa:2021-19