Islamic banking most at risk of negative CBDC effects

IMF paper highlights risk of unremunerated and small retail deposits


An International Monetary Fund working paper finds Islamic banking systems are most vulnerable to possible negative effects of central bank digital currency (CBDC). 

CBDCs may affect monetary policy through their effect on money velocity, bank deposit disintermediation, volatility of commercial bank reserves at the central bank, currency substitution and capital flows. 

If substantial, these impacts could weaken the credit and interest rate channels for monetary policy transmission and impair

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