Bank of Italy publishes analysis finding well-designed CBDCs can raise welfare while weakly backed stablecoins pose systemic risks

The Bank of Italy has published a paper examining how households allocate funds among central bank digital currencies, stablecoins and bank deposits based on financial returns and transactional features such as usability, programmability and privacy. Its model finds that a convenient and trusted central bank digital currency can strengthen monetary sovereignty and improve household welfare even without paying interest. Stablecoins with weak or risky reserve structures may undermine par convertibility, trigger redemption pressures and destabilize the monetary system. Improving deposit-based payment infrastructure through measures such as instant payments and tokenization can help commercial banks retain funding and support monetary policy transmission. The analysis also finds that network effects can produce abrupt portfolio shifts between instruments, although the quantitative results are based on a benchmark calibration rather than structural estimation.