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"Narrow banks would improve the competition in deposit markets, which would in turn would reduce the current subsidisation of incumbent banks, improve the transmission of monetary policy, raise deposit rates at other banks and reduce dispersion in money market rates," McAndrews wrote in comments to the Fed.

This paper compares the financial account implications of CBDC with stable coins and narrow bank digital money, noting the similarity and differences in terms of implications on the financial system.

This paper describes segregated balance accounts (SBAs), a concept for a new type of account that could provide increased competition for deposits, reduce system-wide balance sheet costs, and improve the transmission of monetary policy by facilitating greater pass-through of interest on excess reserves (IOER).

All in all, we worry that the rise of segmented narrow banks could leave the Federal Reserve facing a risk of disintermediation that would diminish the supply of private credit, potentially in a disruptive way. Returning to a pre-crisis world of scarce reserves would diminish this threat at the cost of a sacrificing a useful tool for financial stability. In theory, Congress might find this outcome sufficiently unappealing to restrict SBA-only banks, but that possibility seems remote.

What would be the effect of imposing a 100 percent reserve requirement to depository institutions? This paper contends that reserves do not compete with loans on the asset side of banks' balance sheets. Thus, they only affect liquidity provision by banks indirectly through their impact on the cost of loan and deposit creation. This cost could be driven to zero if, as the Eurosystem does, central banks remunerated required reserves at the same rate of their refinancing operations. The paper argues that the crucial constraint imposed by a fully backed banking system is collateral availability by depository institutions.

Jiko has obtained a bank charter by acquiring its partner bank, Mid-Central National Bank of Minnesota. Jiko has a very stripped-down vision of banking, with no maturity transformation and no credit risk. Instead of being held in deposits, customer money is swept into Treasury Bills, which are liquidated when a person uses a debit card or withdraws cash from ATMs. The start-up secured approval for the move from the Office of the Comptroller of the Currency and the Federal Reserve Bank of San Francisco. Since Jiko passes on the yield from investments and most of the swipe fees on an upcoming debit card to customers, it will likely charge a "Netflix-like" subscription fee.

The U.S. House of Representatives Committee on Financial Services convened a hearing to examine the legal framework and regulatory scope governing the oversight of traditional banks and other commercial businesses - especially technology companies - engaged in financial activity and the effect on consumer protection, financial stability, and the traditional separation of banking and commerce.

"This Article examines whether the Federal Reserve's payments discretion is as great as it now claims-a question that has been raised in three recent cases, but never answered. It concludes the Fed has overstepped. The language and structure of the Federal Reserve Act require that the Federal Reserve provide payment services to all eligible banks. In support of this statutory interpretation, the Article excavates long forgotten legislative history and more than a century of sometimes hidden Federal Reserve payments practices. It shows that although the Federal Reserve has some discretion over the payments it processes and terms under which it offers it payments services, the Fed's discretion is not so broad as to allow it to reject access requests from legally eligible banks. If the Fed wants to exclude banks, it should ask Congress to change the law. "

"The Fed has raised several concerns about narrow banks. The main one is that in times of stress they'd be too attractive as a haven. Money could pour out of Treasury bills, high-quality bonds or even accounts at conventional banks, amplifying risks to the broader financial system. Narrow banks could also make it harder for the central bank to manage short-term interest rates. And because conventional banks could end up holding few deposits, they might do less lending, making loans more expensive and credit harder to get."

"Whatever the reason for the Fed's reluctance to permit TNB to get off the ground, it is sad to see financial policy makers turn down such an obvious boon to financial stability and efficiency, and slow walk it to regulatory death, despite what appear to be clear legal rights of TNB to serve its customers and the economy."

Bank for International Settlements (BIS) staffer Tirupam Goel posted a paper discusses the pros and cons of reserve-backed tokens (RBTs) - stablecoins issued by well-regulated private entities that are solely and fully backed by central bank reserves. (The IMF calls them "synthetic CBDC") They are safer than, and can crowd out, current stablecoins, they can adopt a more flexible design than retail CBDCs and thus foster greater competition and innovation, and compared to bank deposits, RBTs are immune to runs and unencumbered by legacy features. However, they could disintermediate commercial banks during normal times and exacerbate runs during stress periods.

"I am not a fan of the concept. As I will explain, creating a narrow bank within modern economies is largely a solved problem. You will need capital and to be able to hire competent personnel, but assembling the bank thereafter is just tying together existing software packages and personnel together into an institution. The reason why nobody does this is simple: there is no market for such an institution. Sure, you might be able to assemble a cult following among narrow banking bugs in a large country, but it is going to be flop among the broad public."