CBDCs are subject to ‘trilemma’, ECB paper warns

Research builds on Diamond-Dybvig model to examine possibility of runs on central banks

European Central Bank
The European Central Bank

Central bank digital currencies (CBDCs) are subject to a “trilemma”, a working paper published by the European Central Bank argues. 

The paper models a central bank engaged in financial intermediation, based on Douglas Diamond and Philip Dybvig’s classic 1983 work on bank runs. 

In Central bank digital currency: when price and bank stability collide, Jesús Fernández-Villaverde, Linda Schilling and Harald Uhlig say three objectives cannot be simultaneously satisfied. Any central bank involved in

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