<i>CB reserves currently play a central role in payment systems. If two parties need to settle a transaction but hold deposits at different banks, the payment requires a transfer of funds between the two banks. Banks net out such transfers and settle the residual amount using CB reserves as the medium of exchange.</i><p><i>If households and firms were given access to CBcoin accounts at the CB, banks’ dominant role as providers of payment services would be called into question. As a risk-free, interest-bearing asset, CBcoin would be preferable to bank deposits (and even paper currency, presuming anonymity concerns were addressed), encouraging households and firms to convert their bank deposits into CBcoin deposits.</i><p><i>In effect, retail payments (and securities transactions) would no longer have to be mediated by banks, as the funds would be transferred directly from one party’s CBcoin account to another’s. A disintermediated payment system could gradually replace the current centralised system and its associated credit and liquidity risks (see BIS (2003)). The main benefit to CBcoin account holders would be access to cheap and fast peer-to-peer transactions.</i><p>This sounds like all of the benefits of a centralized currency -- most importantly, stability and regulation -- with all of the benefits of current decentralized currency endeavours (Bitcoin, etc.). Assuming anonymity concerns are addressed, as they highlight.<p>The impact on the banking system, however, would indeed be substantial. Providing payment services is a significant source of revenue for banks.