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Controlling CBDC through tiered remuneration

Author(s): Ulrich Bindseil

Date published: Sep 2019

SUERF Policy Note, Issue No 95
by Ulrich Bindseil, European Central Bank

JEL-codes: B12, B22, E42, E52, R58, E63.
Keywords: Central bank money, central bank digital currencies, electronic payments.

This paper discusses two concerns that central bankers have associated with CBDC, namely (i) risk of structural disintermediation of banks and centralization of the credit allocation process within the central bank and (ii) risk of facilitating systemic runs on banks in crisis situations. The paper proposes as solution a two-tier remuneration of CBDC. While the first tier would be attractively remunerated, the second would not. By choosing the per capita allowance of tier one deposits and the remuneration rates of the two tiers, the central bank can control the quantity of CBDC such that it is predominantly used as means of payment, and not as large scale store of value.

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SUERF Policy Note, Issue No 95SUERF Policy Note, Issue No 95

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