ZHU Yu, Associate Professor, School of Economics, Renmin University of China; Former Research Advisor, Bank of Canada

One of the purposes of CBDC is to promote competition in the world of online payments, and the usefulness of CBDC should not be assessed based on its use, but rather how it changes private sector behavior.

Payment systems may give rise to monopoly rights. In the real world, cash is a very effective way for consumers to make transactions, but after transactions move online, there are no such public products. At this time, CBDC can promote competition in the online payment world. The Bank of Canada launched a faster payment system to help banks speed up the rollout of their competitive products. CBDC allows banks to compete with each other or with other payment providers to provide new products. So, the usefulness of CBDC should not be assessed based on its use, but rather how it changes private sector behavior.

Will CBDC lead to the disintermediation of the financial system? According to our research, the answer depends on the market structure of banks. If the banking industry is highly competitive, coordination may occur; if the competition in the banking industry is not so fierce, CBDC may promote competition among banks. Fierce competition will make them take proactive measures. Actions to attract more savings end up causing them not to be disintermediated but to have more coordination.