Digital Bank Holidays

The March 2023 run on Silicon Valley Bank spurred renewed debate about how to structure deposit insurance to best eliminate future bank runs. This Article argues, however, that deposit insurance cannot be relied upon to eliminate all bank runs, especially if technological developments create potential new bank run triggers that deposit insurance may not be responsive to. We may be expecting too much of deposit insurance, and so it is worth considering other tools that might be useful in responding to future bank runs and broader banking panics. One such tool is the “bank holiday,” last deployed in the United States by FDR in 1933. This Article considers how a digital bank holiday could be implemented in this day and age. A digital bank holiday would be a drastic response that should only ever be used as a last resort—but in case such a drastic response becomes necessary, it is worth thinking through the legal and operational mechanics needed to deploy one. This Article embarks upon such an effort, and it also recommends planning for less drastic kinds of interventions that limit (without preventing) digital transactions, as another potential response to bank runs.