Evaluating the Implications of CBDC for Financial Stability

How could practitioners assess the domestic financial stability implications of retail CBDC? This chapter identifies six key transmission channels through which CBDC can affect financial stability—either negatively or positively. These channels operate through bank funding and lending, fee income, run risk, information flows, and payment system resilience. This chapter synthetizes findings from existing studies that quantify some of these effects and explores how country-specific characteristics, CBDC adoption, and design features shape outcomes. It also provides practical guidance on analytical tools and models to evaluate financial stability risks and discusses how risks can be contained with appropriate CBDC design and safeguards.