The Impact of Central Bank Digital Currencies on the Traditional Banking System

Abstract

This paper critically analyzes the potential impact of Central Bank Digital Currencies (CBDCs) on the traditional banking system, considering the increasing global attention these central bank-issued digital currencies are receiving. The objective is to provide insights into the disruptions, opportunities, and challenges that traditional banks may face with the introduction of CBDCs. Examining factors such as disintermediation risks, the possibility of heightened digital dollarization, shifts in demand for bank services, and concerns regarding data security and privacy, the research significantly contributes to the ongoing discourse on the future of banking in the digital currency era. Policymakers, central banks, financial institutions, and researchers stand to benefit from the anticipated valuable outcomes of this study, enabling them to better understand potential implications and formulate effective strategies for navigating the evolving landscape shaped by both CBDCs and the traditional banking system.