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Commercial banks may have bigger role in CBDC design than expected
It is often repeated that the key attribute of a central bank digital currency is that it is as ‘safe’ as cash. Central banks, as agents of government, therefore argue that they should issue CBDCs to provide that safety for their citizens. Central banks around the world, such as the European Central Bank, have created models for issuing CBDCs on the basis of this core premise. However, when working out how to implement CBDC models, a tricky problem immediately comes to the fore: how will the CBDC interact with the commercial banking system? Since the bulk of banking is concerned with lending and other banking ... (full story)