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Economist: Central Bank Digital Currencies (CBDCs) will inevitably weaken commercial banking systems because retail depositors will shift significant balances away from private commercial banks into zero-risk central bank accounts during economic downturns, triggering severe credit contraction. Which of the following, if true, most seriously weakens the economist's argument?

Central banks plan to offer lower interest rates on digital currency deposits than commercial savings banks. Commercial banks rely primarily on wholesale interbank lending rather than retail deposits for liquidity. Central banks can set individual caps on CBDC holdings and apply tiered interest rates to disincentivize large retail deposit transfers. Retail depositors frequently move funds between commercial banks during economic stability.

Correct Answer:

Central banks can set individual caps on CBDC holdings and apply tiered interest rates to disincentivize large retail deposit transfers.

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