Will Banks Disappear If CBDC Becomes Mainstream?

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.     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 ...