WORKING PAPER 01/2024

But the debate tends to be more focused around the decline of cash and the emergence of a new form of central bank money – the central bank digital currency. [...] That is the conclusion Chris Waller, a member of the Board of Governors at the Federal Reserve System, came to after examining the merits of various arguments that have been circulating to justify the introduction of a CBDC (Waller, 2021). [...] The introduction of retail CBDC will not materially reduce the amount of cash in circulation as the arguments put forth here only relate to the shift of current account deposits in banks to CBDC accounts. [...] To the extent that the demand for credit does not fall with the introduction of retail CBDC, the ones with the capacity to provide large quantities of credit will be the e-commerce players. [...] A material decline in the share of bank credit to the economy will reduce the effectiveness of the bank lending channel to the monetary policy transmission process.