The Impact of Central Bank Digital Currencies (CBDCS) on Commercial Bank Credit Creation and Financial Stability

The international financial system is passing through a digital metamorphosis, and Central Bank Digital Currencies (CBDCs) can be mentioned among the main pillars of the monetary innovations. The paper is a critical analysis of the impact of the extensive development of CBDC on the established processes of credit creation in commercial banks and the possible redrawing of the boundaries of financial stability. Based on a comparison of empirical case studies, institutional reports and theoretical economic models the study challenges the possibility of disintermediation of the banking sector, as well as the chance of building more resilient systems. Important aspects point to the fact that CBDCs can provide central banks with greater means of direct control over monetary policies, but they also threaten to undermine the traditional position of banks as loan creators, especially in establishing deposits-based economies. By looking at the models of design, regulatory reaction and behavioral reflections, this paper offers more detailed observations and policy directions that can be used to maintain the situation of harmony between financial system integrity and innovation.