Will Banks Disappear If CBDC Becomes Mainstream?

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If Central Bank Digital Currency (CBDC) becomes mainstream, what will happen to the role of traditional banks? Rather than speculating that "banks will vanish," this post explores the realistic shifts and new functions financial institutions will take on in a CBDC ecosystem.

 

 

Digital currency icons and CBDC symbols floating above a smartphone screen
Redefining Banking in the Digital Era
Source: Vecteezy / Bing Images (royalty-free)

1. Shrinking Deposit Intermediation

If citizens begin holding funds directly in central bank-issued CBDC wallets, the traditional role of banks in collecting deposits may shrink.

  • Deposit Reduction: Funds shift from banks to central bank wallets
  • Liquidity Shift: Banks must adjust their capital operations model

 

 

2. Risk of Digital Bank Runs

During financial instability, customers may quickly withdraw funds from banks and move them into CBDC wallets, increasing the risk of digital bank runs.

  • Contagion Risk: Sudden deposit outflows triggered by panic
  • Mitigation Tools: CBDC holding limits, withdrawal delays, or tiered interest

3. Shift Toward Credit and Advisory Services

Banks will increasingly focus on value-added services like lending, asset management, and credit assessment rather than traditional deposit-based operations.

  • Personalized Lending: AI-driven credit scoring for tailored loan products
  • Integrated Wealth Services: Investments, insurance, and robo-advisory combined

4. Unified CBDC Financial Platforms

Banks may integrate CBDC wallets into their apps and evolve into platforms offering complete financial services—payment, remittance, exchange, and budgeting.

  • All-in-One Interfaces: View, send, and manage CBDC within the bank app
  • Service Bundling: Link loyalty programs, savings, and financial products

 

 

5. Inclusion and Social Function of Banks

Banks will be instrumental in ensuring access to financial services for underserved populations in the early stages of CBDC adoption.

  • Unbanked Access: Enable fund transfers and benefit reception without accounts
  • Education & Support: Assist the public in understanding and using CBDC tools

6. Regulatory and Supervisory Expansion

If central banks manage retail wallets directly, regulators must reshape frameworks for oversight, privacy, and systemic risk.

  • Real-Time Monitoring: Track money flows and address anomalies early
  • Systemic Risk Response: Rapid reaction to stress in financial infrastructure
  • Privacy Balance: Design systems that balance anonymity with compliance

 

 

Conclusion: CBDC Won’t Eliminate Banks, It Will Evolve Them

CBDC is not the end of banking—it’s a turning point. Traditional deposit functions may decline, but new business models in lending, investment, and digital services will emerge.

In the CBDC era, banks will not disappear. They will transform—becoming more specialized, digitally integrated, and platform-centric.