Economics · Banking and Finance
How could the widespread adoption of a Central Bank Digital Currency (CBDC) impact the traditional fractional reserve banking system in an economy?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It automatically forces the central bank to impose higher mandatory reserve requirements for commercial banks.
- 2It may possibly reduce commercial bank deposits, thereby lowering reliance on fractional reserve banking.✓
- 3It will immediately make fractional reserve banking legally obsolete.
- 4It would have no impact because CBDC and fractional reserve banking operate completely independently.
Correct answer
It may possibly reduce commercial bank deposits, thereby lowering reliance on fractional reserve banking.
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