CENTRAL BANK DIGITAL CURRENCY EFFECTS ON FRACTIONAL RESERVE BANKING

An aim of the paper is to explore the outlines of the looming monetary order. For these purposes, we have made a brief retrospective analysis of money genesis. In its inception market had selected gold as a medium of exchange and gold had become a social institution. After WWII the leading force of monetary order changed. The Bretton Woods conference had made a political agreement to endorse the US dollar as a reserve currency. In 1971 the picture had become clearer, and the gold-backed dollar system collapsed as it was predicted earlier. A digital environment has given the reborn of new types of money. The pioneer of digital money was the crypto currency, a decentralized and transparent system to pay and hold the value. As the old saying tells, everything new is well forgotten old one. Since 2021 central Bank of China has launched a digital RMB pilot program. It is easy to grasp that the state tries to substitute the market-developed money (crypto currencies) with the monopolistic system of CBDC. We have found out the effects of CBDC on retail banking and the incapability of CBDC monetary order with fractional reserve banking.