Central Bank Digital Currencies and Bank Deposit Dynamics: Evidence from Cross-Country Difference-in-Differences Analysis

Abstract The emergence of central bank digital currencies (CBDCs) represents one of the most significant innovations in contemporary monetary systems. As central banks explore digital forms of sovereign money, an important question concerns how CBDC introduction may affect the structure of financial intermediation, particularly the role of commercial bank deposits. Because CBDCs constitute a direct claim on the central bank, their availability may alter the allocation of liquid assets held by households and firms and potentially influence bank funding structures. Theoretical research emphasizes that the macro-financial implications of CBDCs depend critically on their design features, including remuneration policies, holding limits, access rules, and distribution models. These design parameters determine the relative attractiveness of CBDCs compared with traditional bank deposits and therefore shape the magnitude of potential deposit substitution. However, empirical evidence on the real-world effects of CBDC implementation remains limited due to the recent emergence of CBDC projects and the substantial heterogeneity in their design and operational frameworks across countries. This paper investigates whether the activation of a CBDC is associated with changes in commercial bank deposit holdings using a cross-country panel dataset covering 30 economies over the period 2015–2024. The empirical analysis employs a Difference-in-Differences framework with staggered treatment timing, complemented by event-study estimates and alternative estimators designed to address identification challenges in two-way fixed-effects models. To partially capture cross-country heterogeneity related to CBDC design and adoption environments, the specification incorporates interaction terms reflecting differences in financial digitalization and payment system structure. The results indicate that CBDC activation is associated with a statistically significant decline in bank deposits as a share of GDP, with stronger effects observed in digitally advanced financial systems.