CBDC [Central Bank Digital Currencies] must not cannibalize countries’ commercial financial systems, JPMorgan outlined.
This risk lies in banking users moving funds from checking accounts to a CBDC account, which could lead to the exodus of the max amount as 30% of commercial banks’ funding base, JPMorgan strategist Josh Younger outlined within an official note cited by Bloomberg earlier today on Friday.
“Relatively heavy-handed caps on holdings would be needed to scale back the utility of a retail CBDC as a store usefulness,” Younger added within the note.
Younger proposed a limit of $2,500 USD. That would meet the requirements of lower-income households without having a major effect on commercial banks’ funding mix, as long as most such households have less than $1k in their checking accounts.
“If all one among those depositors were to carry only retail CBDC, it might not have a material impact on bank funding,” he added.
A hypothetical conflict between central banks and commercial banks for consumer deposits is usually raised as a risk within the development of CBDCs. Were users to put all their funds in an account with the central bank then it might hinder commercial banks’ ability to offer loans and mortgages, with a consequence on the wide economy.