Definition ∞ Bank-issued money represents the digital liabilities commercial banks hold for their customers. This form of money is created when banks extend credit or receive deposits, appearing as balances in customer accounts. It constitutes the vast majority of money in modern economies, distinct from physical cash or central bank reserves. Its value is contingent upon the issuing bank’s solvency and the regulatory framework governing traditional finance.
Context ∞ The emergence of digital assets and central bank digital currencies has intensified discussions surrounding the future of bank-issued money. A key debate involves how traditional banking systems will coexist with or integrate new digital payment rails. Critical future developments include regulatory adjustments to accommodate novel forms of digital value and potential shifts in how financial institutions manage liquidity and customer accounts in a more digitalized landscape.
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