Bachelor Thesis from the year 2021 in the subject Economics - Monetary theory and policy, grade: 1,0, University Witten/Herdecke, language: English, abstract: In this paper, I will dissect the prospective impact of retail central bank digital currencies with reference to the hierarchy of credit in modern monetary economies. If central banks decide to issue digital currencies in a similar manner to their issuance of cash, public money will become more widely accessible and potentially threaten the business model of commercial banking. Thus, considerations about financial stability need to be critically assessed to ensure that central bank digital currencies can become a positive addition to monetary environments. Being a literature review, this paper will thoroughly revise existing accounts on a variety of challenges and chances regarding a transformation of current structures before discussing these findings. This approach will demonstrate that central bank digital currencies provide a benefit to society and strengthen the monetary sovereignty of the central bank without jeopardizing financial stability.