Central Bank Digital Currency: One, Two or None?

This paper draws a distinction between wholesale CBDC (WCBDC), accessible only to financial intermediaries, and retail CBDC (RCBDC), accessible to the general public. The issuance of one could be dissociated from the other, implying the possibility of one, two, or no CBDC(s). The paper considers the possible motives, modalities, and consequences of central bank digital currency (CBDC) issuance in both forms for the economy, the financial system, monetary policy and financial stability. The issuance of a CBDC would represent a supply shock, which would support economic growth in the medium to long run and could transitorily weigh on prices. Furthermore, the issuance of a RCBDC could put a floor to bank deposit rates and, if it is remunerated, raise them. If the RCBDC were not remunerated, the effective lower bound would be raised to zero and the effectiveness of asset purchases by the central bank could be diminished. If it were, the interest and exchange rate channels should be strengthened. The remuneration of the RCBDC would thus seem to create a trade-off between the effectiveness of monetary policy and the cost of bank intermediation.