In a systemic crisis, despite the protection provided by government deposit guarantee schemes, households and businesses could seek to hold their wealth in the riskless central bank liability rather than the riskier private sector one.18 While this shift could also happen now between deposits and cash, a digital currency would make it cheaper and faster, making “digital bank runs” more frequent and more severe.
In the steady state, the risk is that households and firms find digital currency more convenient than bank deposits, depriving banks of a stable source of funding and undermining their social role at a time when some of their other functions, such as the provision of payment services, are already severely challenged by new entrants.19 In the euro area, for example, non-monetary financial institutions have considerably expanded their share of financial intermediation in recent years.