On the other hand, in the situation of digital bank runs, since people can easily move their funds without even go to a bank branch, liquidity problems could accelerate very rapidly. Moreover, if central bank digital currencies replace not only cash but also bank deposits, they could squeeze banks' credit intermediation and influence the supply of credit to the economy.
If overvaluations of assets are driven by rapidly expanding credit, in a downturn the deteriorating balance sheets of borrowers and lenders constrict new lending.7 8 This, in turn, curtails investment and so worsens the economic contraction.9 10 In the 1980s, rising bank credit also fuelled a surge in land prices in major cities in Japan.