Role of Banks on CBDC
Executive summary
Central banks worldwide are actively experimenting with retail and wholesale CBDCs to modernize payments, promote inclusion and defend monetary sovereignty; examples include India expanding retail and wholesale use cases and the e-rupee rising 334% in circulation to ₹10.16 billion by March 2025 [1]. Policymakers and researchers warn CBDCs could both substitute bank deposits over time and enable faster "runs" in stress, forcing banks into new roles in distribution, liquidity management and service innovation [2] [3].
1. CBDCs are not just a central-bank technical project — they redesign the banking plumbing
Central banks view CBDC as a tool to preserve sovereign money in a digital age and to provide a public digital payments infrastructure on which private providers can innovate, which inherently changes how retail and wholesale payment flows are routed and settled [4] [5]. That shift implies banks will no longer be sole gatekeepers of retail deposits and wholesale settlement, creating both competition and new partnership opportunities between central banks, commercial banks and chosen service providers [6] [4].
2. Two central risks for banks: “slow” and “fast” disintermediation
Academic and central‑bank researchers frame the banking impact as either slow disintermediation—CBDC steadily substituting for bank deposits and raising banks’ funding costs—or fast disintermediation—CBDC providing a convenient safe haven in turmoil and amplifying the speed and size of runs [2]. Empirical modelling and surveys around a hypothetical digital euro find households would likely shift some deposits to a CBDC in normal times and be even more prone to withdraw in stress, reinforcing these dual concerns [2].
3. Commercial banks may nonetheless shape CBDC design and distribution
Multiple analysts expect commercial banks to retain a major operational role: as customer-facing intermediaries (wallets, KYC, onboarding), as liquidity managers, and as competitors for deposits. OMFIF and other commentators argue that central banks will need to accommodate banks’ lending role and balance-sheet reliance on deposits, meaning bank interests can influence design choices like holding limits, interest rules and tiering [3] [4]. Available sources do not mention a single universal distribution model; instead they document many jurisdictions exploring tiered or bank-mediated architectures [5] [6].
4. Policy levers to protect banking stability — and where they trade off with other goals
Central banks and IMF guidance list design tools—limits on individual CBDC holdings, non-interest-bearing accounts, two-tier architectures that route retail activity through banks, or caps and phased rollouts—to reduce deposit flight and run incentives [3] [7]. Those same measures reduce CBDC attractiveness for users and can blunt inclusion or efficiency goals, so policymakers face explicit trade-offs between financial stability and usability or privacy [4] [7].
5. Emerging markets drive retail CBDC uptake — banks in those markets face different incentives
Emerging economies are pushing retail CBDCs to reduce cash use, boost inclusion and tighten oversight; India is expanding retail and wholesale CBDC capabilities and significantly growing e‑rupee circulation, illustrating this momentum [1]. In these markets, banks may be partners in inclusion efforts rather than only opponents, since CBDC can extend digital payment rails where banking penetration is low [1] [8]. The IMF cautions, however, that CBDC is not a panacea for inclusion and outcomes depend on design and complementary policies [8].
6. Banks’ business models will adjust: costs, services and competition
Research on deposit‑dependent banks shows that even moderate conversion rates of deposits into CBDC would have created funding pressures and profit losses in many years, underlining a tangible business-model shock for banks heavily reliant on retail deposits [9]. That shifts the strategic emphasis for banks toward fee income, services beyond deposits (trade finance, lending relationships) and competing on value-added digital services if they are to offset lost low-cost funding [3] [9].
7. Where the debate still splits: privacy, interoperability and the role of wholesale CBDCs
Central banks worry about privacy, cyber resilience and cross-border interoperability as much as bank stability; some see wholesale CBDCs as a separate route to upgrade interbank plumbing, tokenise securities and improve cross-border settlement, which could expand roles for non‑bank participants as well [6] [10]. The sources show differing priorities: the ECB focuses on a privacy‑respecting retail offering while BIS and academics stress systemic stability risks — a clear sign the industry’s policy architecture is still contested [2] [10] [4].
Limitations: available sources summarize design options, pilots and modelling but do not provide a final, global blueprint for bank roles in every jurisdiction; local legal frameworks and political choices determine exact outcomes [5] [7].