Central Bank Digital Currency Research Articles

Balance sheet implications of a two-tier operation central bank digital currency

Balance sheet implications of a two-tier operation central bank digital currency

Consumer Acceptance of Central Bank Digital Currency in a Fully Launched Market

Since 2020 the number of countries and currency unions exploring the implementation of central bank digital currency (CBDC) has increased by approximately 300 percent. The literature shows an abundance of technical feasibility studies and a dearth of research on consumer adoption. This study investigates consumer adoption of CBDC in a market (Jamaica) in which it was already launched. Data was collected from 200 respondents based on a convenience sample. A conceptual model was constructed based on the unified theory of acceptance and use of technology. To validate the model and test the six hypotheses we employed PLS-SEM partial least squares structural equation modeling. Three of the six hypotheses were supported: behavioral intention has a significant positive impact on user behavior, social influence had a significant positive impact on behavioral intention, and facilitating conditions has a significant positive impact on user behavior. Age and gender had no moderating effect. This is the first study done in a market where CBDC was implemented, done on consumers and provided jurisdictional recommendation to create network effects and increase adoption

Understanding enablers and inhibitors of digital rupee: a dual-factor theory perspective

Purpose Central banks globally are actively investigating the issuance of central bank digital currencies, a digital form of fiat money. In this light, this study aims to explore and empirically validate the factors that enable or inhibit user behavioral intentions to adopt the digital rupee in India. Design/methodology/approach The study employed dual-factor theory (DFT) to capture the users’ perceptions of both enablers and inhibitors of the digital rupee. The authors gathered survey data from 351 individuals in India through online questionnaires. The authors used partial least squares structural equation modeling and multigroup analysis (MGA) to evaluate the proposed conceptual model. Findings The findings reveal that enablers such as perceived government support, trialability and similarity positively influence users’ attitudes toward the digital rupee. In contrast, inhibitors such as usage, value and risk barriers increase users’ resistance. Attitude has a significant positive impact on the intention to use the digital rupee, while resistance significantly reduces the intention to adopt it. MGA results highlight the importance of gender and income status in understanding intention to use the digital rupee. Originality/value By applying DFT, the study identifies a set of enablers and inhibitors that influence the behavioral intention to use the digital rupee in India. It provides actionable insights for governments and central bankers to devise effective policies, design considerations and targeted interventions, ensuring a sustainable environment for the successful implementation of the digital rupee.

Quantum Cryptography and Blockchain-Based Social Media Platforms as a Dual Approach to Securing Financial Transactions in CBDCs and Combating Misinformation in U.S. Elections

This paper explores the integration of quantum cryptography and blockchain technology to address two pressing challenges: securing financial transactions in Central Bank Digital Currencies (CBDCs) and combating the spread of misinformation during U.S. elections through decentralized social media platforms. As quantum computing advances, traditional encryption methods may become obsolete, posing significant risks to digital financial systems. Quantum cryptography, with its quantum-resistant algorithms, offers enhanced protection for CBDC transactions, ensuring long-term security and privacy. Simultaneously, blockchain-based social media platforms provide a decentralized structure that can prevent the dissemination of false information by ensuring transparency and authenticity through cryptographic verification and consensus mechanisms. These platforms also facilitate decentralized identity management, empowering users to verify content without relying on centralized authorities. By combining quantum cryptography’s secure framework with blockchain’s decentralized transparency, this dual approach creates a more secure digital ecosystem that not only safeguards financial transactions but also strengthens democratic processes. The paper further addresses the regulatory and technical challenges associated with implementing these technologies and their potential to shape a more secure, transparent, and accountable future.

Central bank digital currency and bank intermediation: Medium of Exchange vs. Savings vehicle

This paper analyzes the effects of a retail central bank digital currency (CBDC) on bank intermediation within a general equilibrium model and provides a quantitative assessment. In the model, banks offer both transaction and savings deposits. This allows to study how a CBDC’s impact varies based on its usage as a medium of exchange or as a savings vehicle. When a CBDC is used as a savings vehicle that competes with savings deposits, the level of disintermediation almost doubles compared to a scenario where the CBDC is used solely for transactions and competes only with transaction deposits.

Antecedents of users’ switching intention to Central Bank Digital Currency: A push-pull-mooring model perspective

Antecedents of users’ switching intention to Central Bank Digital Currency: A push-pull-mooring model perspective

Making Tax Smart: Feasibility of Distributed Ledger Technology for Building Tax Compliance Functionality to Central Bank Digital Currency

The latest advancements in distributed ledger technology (DLT) and payment architectures such as the UK’s New Payments Architecture present opportunities for leveraging the hidden informational value and intelligence within payments. In this paper, we present Smart Money, an infrastructure capability for a central bank digital currency (CBDC) which enables real-time value-added tax split payments, oversight, controlled access, and smart policy implementation. This capability is implemented as a prototype called Making Tax Smart (MTS), which utilises the open-source R3 Corda DLT framework. The results presented herein confirm that it is feasible to build an MTS capability which is scalable and co-exists with the current payment systems. Smart Money CBDC has the potential to mobilise payments data, transforming the role of money from a blunt instrument to a government policy sensor and actuator without disrupting the existing money system. DLT, smart contracts, and programmable money have a crucial role to play with benefits for government departments, the economy, and society as a whole.

Central Bank Digital Currencies: Experimental Evidence of Deposit Conversion

Abstract In this paper, we provide unique experimental evidence of depositors’ behaviour in presence of a possibility to convert commercial bank deposits into central bank digital currency (CBDC). Theoretically and experimentally we analyse whether such an option incentivises bank runs. We find that the availability of the deposit conversion option does not lead to a significant outflow of deposits. However, when conversion is restricted, depositors are eager to actively use it as a coordination tool. These findings highlight the importance of considering coordination and decision time in determining the choice to convert deposits into CBDC. Our study evidences that policy-makers should balance accessibility and control measures to maintain financial stability, ensuring that CBDC implementation supports the resilience of the banking system.

Readiness to Use the Digital Euro (CBDC) by Consumers Based on the Example of France and Germany

Theoretical background: Attempts to offer the users of state money its new digital form with characteristics partially similar to cash and cryptocurrencies led to the creation of the Central Bank Digital Currency (CBDC) concept. In October 2020, the European Central Bank (ECB) published a report on the conditions for building the concept of the digital euro. On January 12, 2021, the ECB completed collecting the opinions of potential users (understood as natural persons) and representatives of companies, institutions, and experts on their expectations for the future digital euro. However, the survey only asked a few questions about the preferred features of the digital euro. The questionnaire form was only available on the website of the ECB, which made the respondents a specific group as only those who were interested in visiting the website replied. Representatives of companies, institutions, and experts also provided answers from the user’s point of view. The questions did not take into account the characteristics of the respondents ensuring the representativeness of the research sample. Purpose of the article: The article aims to define the relationship between the characteristics of consumers (individual users of money as a product of the central bank) from France and Germany and their acceptance of using the digital euro. Research methods: The analysis used data from a survey conducted using the CAWI method. The study was conducted in August 2021 on a group of adult internet users representative in terms of gender, age, and place of residence, including 638 German and 646 French respondents (full responses). Main findings: The results show that in both countries the consumers most willing to accept the digital euro are men rather than women, consumers already taking advantage of the opportunities offered by mobile banking, and consumers who believe that the money entrusted to banks is not safe. However, the differences observed in the example of only these two countries support the conclusion of other researchers about the need to conduct this type of research either in the entire eurozone or in selected eurozone countries with specific payment habits.

Digital Rupiah as An Alternative Digital Transaction in Indonesia

Digitalization in the financial industry revolutionized the transaction system with the emergence of Cryptography-based Digital Currencies. It has recently evolved into digital currencies issued by central banks, known as Central Bank Digital Currency (CBDC). Bank Indonesia responds by developing a plan to release Digital Rupiah as part of the digital transformation initiative in the national payment system. This study aims to determine the authors' interest in discussing Indonesia's CBDC as seen through article publication trends. This research uses the systematic literature review (SLR) method. The results show that there is an increasing trend in the publication of articles on Digital Rupiah. The published articles discuss Digital Rupiah from various sides such as legality, implementation mechanism, challenges opportunities and impacts, to its potential implementation.

Enhancing Mobile Central Bank Digital Currency Payment Participation Through Creative Communication on Social Media

With the development of mobile technology, mobile devices have dramatically changed the way people entertain and pay. Social media platforms are booming, and social media is gradually becoming the main form of entertainment for people. Enterprises and organisations with promotional needs are paying more attention to the high efficiency and high input–output ratio of social media communication. Social media advertising has shown more vitality than traditional advertising. Meanwhile, mobile devices have also changed the way people pay, and mobile payment is gradually becoming popular. China has taken the lead in launching mobile Central Bank Digital Currency (CBDC) payment, a new payment technology, and social media communication also plays an important role in promoting CBDC payment. The purpose of this article is to explore the impact of social media creative communication on mobile CBDC payment participation. A research model suitable for this study was created by integrating privacy concern and elaboration likelihood model theory. A valid response from 300 respondents was obtained through an online self-administered questionnaire. Hypotheses were tested through a two-stage research method of partial least squares structural equation modelling with the method of artificial neural network. The results of the study showed that social media advertisements’ creativity and social media information quality significantly and positively influence users’ social media engagement. Users’ social media engagement significantly and positively influences users’ mobile CBDC payment participation. The study provides valuable practical guidance for managers of mobile CBDC payments to promote mobile CBDC payments through social media.

Addressing governance challenges of digitalisation and sustainability: The case of central bank digital currency

AbstractDigitalisation and environmental sustainability are widely discussed topics. However, their nexus remains underexplored and can pose significant challenges for governments and industries alike. The environmental implications of digitalisation are becoming increasingly pertinent with the advent of central bank digital currencies (CBDCs) and their inherent energy consumption and production of e‐waste. On the other hand, digitalisation could potentially support sustainability efforts. This begs the question of how systems of governance, such as regulatory frameworks and internal organisational governance, should harmonise digitalisation and sustainability goals. Such harmonisation entails ensuring that digitalisation processes are environmentally responsible while exploring how the application and features of digitalisation can help achieve environmental goals. By drawing insights from the case study of CBDCs, this article will utilise the paradigm of adaptive governance to seek potential solutions to the environmental implications of digitalisation.

Drivers of digital currency adoption and their configurational impact assessment in tourism and hospitality: loss aversion under prospect theory

ABSTRACT With accelerated digitalisation in all business sectors, digital currencies (DC) are increasingly popular. This study aimed to identify the effects of central bank digital currency (CBDC) innovation characteristics and perceived risks on CBDC adoption intention in the tourism and hospitality field. This study devised a research model incorporating research hypotheses addressing CBDC customers’ perceptions of CBDC's innovative technology and risks. To test the hypotheses, data were obtained from the USA, Korea, and China. CBDC's innovation characteristics and perceived risks affected the adoption of CBDC for transactions during travel. The results have academic and practical value because they aid understanding of customers’ reactions to the new transaction system and establish proactive marketing strategies such as promotional message development to reduce perceived risks in lieu of strengthening innovative characteristics.

Impact of central bank digital currency uncertainty on international financial markets

Is the impact of central bank digital currency (CBDC) uncertainty on investment and financial stability significant? To address this pivotal question in the era of CBDC development, we employ a combination of models: the time-varying parameter vector autoregression with stochastic volatility (TVP-SV-VAR); the Baba, Engle, Kraft, and Kroner multivariate generalized autoregressive conditional heteroskedasticity (BEKK-MGARCH) model, and wavelet quantile correlation (WQC) analysis. Based on the findings, macrofinancial variables significantly respond to CBDC uncertainty shocks, exhibiting time-varying, heterogeneous, and stage-specific characteristics. These effects are most pronounced in the short term, but diminish over the long term. Notably, the impact of CBDC uncertainty shocks on other financial variables exceeds the reverse impact. In addition, asymmetric volatility spillovers are found, suggesting complex interdependencies. The implication of the findings is that interactions between CBDC uncertainty and financial variables evolve across short-, medium-, and long-term horizons, emphasizing the need for central banks to adopt a flexible approach in CBDC design to alleviate market concerns and enhance overall financial stability.

Wholesale Central Banks Digital Currencies and New Opportunities for Interbank Settlements with the Prospect of Entering International Transactions

A new generation of digital technologies that make it possible to speed up settlements and reduce their cost was born from crypto-currency projects, but the prospects of their economically effective and socially responsible application associate with central bank digital currency. The article discusses the issues of digitalization of central bank money in relation to interbank settlements, including for servicing cross-border payment turnover. So far, this topic has not found a significant response in Russian scientific journals. This publication aims to popularize it by summarizing and analyzing examples extracted from foreign experiments. The advantages of digitalization are compared with the capabilities of conventional payment systems. Descriptions and comparisons of the architectures of the new generation payment system are given, in the range of which it is possible to choose compromises between benefits, risks and costs in the search for the optimal solution. In conclusion, the prospects for the transition to an experiment with digitalization of wholesale payments in Russia are assessed following the upcoming introduction of the “retail” digital ruble

Best Before? Expiring Central Bank Digital Currency and Loss Recovery

AbstractPhysical cash enables payments in the absence of electricity or network coverage. Such offline payment functionality promotes the operational resilience and, particularly in developing countries, the accessibility of payments. Central banks are exploring issuing digital cash substitutes with similar offline payment functionality. Such substitutes could incorporate novel features, making them more desirable than physical cash. This paper considers automating personal loss recovery for offline digital currency balances through the introduction of an expiry date. Our results show this functionality could have a substantial positive impact on consumer demand for offline digital currency balances. We find an asymmetric impact on welfare of adjustments to the expiry date: small increases from the optimum cause little damage, but small decreases from the optimal expiry date can have a large negative impact. More information‐sharing between user devices and the central bank can improve loss recovery but has an ambiguous impact on social welfare.

Understanding the rapid development of CBDC in emerging economies

Central Bank Digital Currencies (CBDCs) mark a significant evolution in digital finance. This study examines the factors influencing CBDC adoption, highlighting the roles of regulatory quality and digital financial access. Results indicate that regulatory frameworks, rather than the level of digital infrastructure, predominantly drive CBDC initiatives. The findings caution against the rapid deployment of CBDCs in less prepared environments, which could pose risks to financial stability. The research underscores the importance of comprehensive regulatory strategies over technological readiness for successful CBDC implementation. Developed markets are advised to consider policies that mitigate risks associated with the transition towards digital currencies.

The Optimal Quantity of CBDC in a Bank-Based Economy

We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank’s deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area economy that replicates such evidence, we find that CBDC issuance yields nontrivial welfare trade-offs between, on one side, the positive expansion of liquidity services and the improved stabilization of deposit funding and lending and, on the other side, a negative bank disintermediation effect. The optimal amount of CBDC lies between 15 and 45 percent of quarterly GDP. (JEL E23, E42, E58, F33, G14, G21)

Central Bank Digital Currencies and Financial Stability: Balance Sheet Analysis and Policy Choices

Central Bank Digital Currencies and Financial Stability: Balance Sheet Analysis and Policy Choices

Analysis of the Potential Impact of Central Bank Digital Currency (CBDC) on Banking in Indonesia

Analysis of the Potential Impact of Central Bank Digital Currency (CBDC) on Banking in Indonesia