Central Bank Digital Currency Research Articles

Analysing consumer switching behaviour and financial antecedents to determine the intention to use central bank digital currency: evidence from the Indian economy

PurposeThe present research aims to study the behavioural intention to use the digital currencies issued by the central bank through the lens of technology acceptance and switching behaviour perspective. The study also proposes to analyse the role of financial constructs to explain the adoption intention.Design/methodology/approachThe current study develops a model by integrating the unified theory of acceptance and use of technology (UTAUT) and the push–pull–mooring (PPM) theory of switching behaviour. It amends the same by including financial literacy, financial inclusion and trust. A sample data of 419 respondents has been collected through a structured questionnaire and the PLS-SEM approach has been used for data analysis.FindingsThe findings suggest that UTAUT and PPM models can significantly predict individuals' readiness to adopt the central bank digital currency (CBDC). More precisely, performance expectancy, social influence, government support, relative advantage and task-technology fit jointly determine the adoption behaviour. Besides, the financial constructs also affect the intention to use CBDC.Research limitations/implicationsThe study is largely based on a quantitative approach with cross-sectional data from an Indian sample. Thus, the findings may benefit from a longitudinal approach with mixed-method data analysis. However, the study elaborates on several implications for policymakers and research scholars.Originality/valueThe present study uniquely integrates the technology adoption perspective with switching behaviour applied to the migration studies. Given the nascent stage of CBDC implementation in many countries, the current study uses a triangulation approach to enhance the understanding of its adoption behaviour.

From Chaos to Clarity: India's Legalization Journey of Cryptocurrency

Cryptocurrency has revolutionised the global financial system by offering a decentralised, digital alternative to traditional currencies. Cryptocurrencies allow safe peer-to-peer transactions without the use of traditional financial middlemen by leveraging blockchain technology. Since the launch of Bitcoin, the most well-known cryptocurrency, in 2009, other digital assets like Ethereum, Ripple, and Litecoin have seen tremendous growth. These virtual currencies function on decentralised networks without the interference of a centralised authority. The rise in popularity of Bitcoin in the early 2010s marked the beginning of the introduction of cryptocurrencies in India. Due to the market's initial lack of regulation, there were both exhilarations and worries. In 2013, the Reserve Bank of India (RBI) released its first advisory about cryptocurrencies, outlining the potential dangers of fraud, security, and market volatility. The RBI outlawed cryptocurrency banking in 2018, making it illegal for financial institutions to deal with virtual currencies. But in March 2020, the Supreme Court declared this restriction to be unconstitutional, which rekindled interest in the cryptocurrency market. There is still regulatory ambiguity despite this. Since then, the Indian government has held lengthy talks over legislation about cryptocurrencies. While possibly limiting private cryptocurrencies, the Cryptocurrency and Regulation of Official Digital Currency Bill offers a legislative framework for the Reserve Bank of India's Central Bank Digital Currency (CBDC), the Digital Rupee. India is now considering how to regulate decentralised cryptocurrencies as of 2024. There isn't a complete legal structure for cryptocurrencies in India yet. Cryptocurrency trade and use are indirectly impacted by extant legislation, including the Income Tax Act and anti-money laundering rules. Despite the RBI’s 2018 circular being overturned, prudence with digital currencies is advised. Cryptocurrency exchanges must follow KYC and anti-money laundering regulations. The pending Cryptocurrency Bill aims to address regulatory ambiguity, while the RBI-backed Digital Rupee offers a regulated alternative.

THE IMPACT OF CENTRAL BANK DIGITAL CURRENCY (CBDC) VOLATILITY ON MONETARY POLICY EFFICIENCY IN FINANCIAL INCLUSION AND INVESTMENT

This paper explores the impact of Central Bank Digital Currency (CBDC) volatility on the efficiency of monetary policy, focusing on its role in financial inclusion and investment. As the world increasingly embraces digital currencies, central banks are exploring the potential benefits and risks associated with CBDCs. Volatility in CBDCs may have significant implications for the effectiveness of monetary policy, potentially influencing inflation control, interest rates, and economic stability. Moreover, CBDCs' introduction could either enhance or hinder financial inclusion by providing new opportunities for unbanked populations or exacerbating existing disparities. The paper reviews existing literature on CBDCs, highlighting key findings on their volatility and its effects on policy formulation. Furthermore, it assesses how volatility may impact investment decisions, both in terms of risk perception and market behavior. By examining the intersection of monetary policy, financial inclusion, and investment, this paper aims to provide a comprehensive understanding of CBDCs' potential in shaping modern economies. It is critical for policymakers to consider the dynamic nature of CBDC volatility when designing strategies for effective financial inclusion and sustainable investment. The paper concludes by identifying gaps in the current literature and proposing future research directions to further explore CBDC's impact on global economic systems. Ultimately, this review underscores the importance of mitigating volatility to maximize CBDCs' benefits in fostering inclusive economic growth.

Opportunities to future crime: Scoping the future of money laundering and terrorist financing through cryptoassets

Despite market turbulence, innovation in the cryptoasset ecosystem continues to derive new financial technologies that can facilitate pseudonymous money transfers. Though the money laundering (ML) and terrorist financing (TF) risks of this phenomenon are well documented, rapid innovation consistently generates inadvertent new opportunities for criminal exploitation. This futures-oriented systematic scoping review of 200 publications aims to identify new and emerging: (1) enablers of ML/TF in the cryptoasset space; (2) geopolitical trends that exacerbate these risks; (3) specific criminal methods of cryptoasset-enabled ML/TF; (4) relevant stakeholders; and (5) inherent risk characteristics. This review has two aims: the first is to provide a repository of insights that are relevant for stakeholders with crime prevention obligations, including insights into non-fungible tokens (NFTs), decentralised finance (DeFi), metaverse technologies, central-bank digital currencies (CBDCs), Russia's invasion of Ukraine and North Korea's “Lazarus Group” cyberhackers. The second is to analyse thematically the insights gained to create a checklist-style framework of factors that exacerbate the ML/TF risks of emerging innovation, called the Opportunity-to-future crime (O2FC) Framework. Policymakers and academics can screen new developments against this checklist to determine the nature of their crime threats and priorities for prevention measures and/or future research. To legitimise its use, this framework is backed through crime scientific opportunity theories that strengthen the themes emerging from the review. The ultimate objective is to contribute to the sustainable development of cryptoasset technologies, specifically by motivating pre-emptive prevention strategies that counter projected ML/TF risks before their exploitation becomes mainstream.

Fintech law in the European Union, the United States and China: Regulation of financial technology in comparative context

This comparative study identifies and explains commonalities and differences in regulation of fintech in the EU, the US and China. Since fintech is deeply shaped by the local financial system, which fintech sectors have received more regulatory attention, as well as the pace and scope by which regulatory reforms fit for fintech in each jurisdiction have been introduced, are jurisdiction-specific. Although each jurisdiction has shown interest in developing its own central bank digital currency, motivations are partly rooted in different causes. Regulation of mobile payment and data protection also differ, with recent convergence to the EU approach. Similarities between the compared jurisdictions can be found in the policy aims for fintech regulation as well as in the struggle to balance these regulatory aims. Owing to the rapid pace and constant evolution of fintech, none of the jurisdictions has a single legislative framework for fintech nor a single fintech regulator, resulting in fragmented regulatory frameworks for fintech firms and services. The local level has been significant in regulating fintech while allowing space for regulatory flexibility and experimentation. Lastly, cryptocurrencies have raised similar concerns in all three jurisdictions, even if the regulatory approach has differed.

Exploring the Economic Impact of Digital Currencies on Traditional Financial Systems: Challenges and Opportunities

This study investigates the economic impact of digital currencies on traditional financial systems, focusing on the challenges and opportunities that arise from the integration of digital assets into mainstream finance. Using a qualitative approach based on literature review and library research, this article synthesizes existing research to examine how digital currencies—particularly cryptocurrencies and central bank digital currencies (CBDCs)—are reshaping the global financial landscape. The analysis reveals that digital currencies present opportunities for enhanced financial inclusion, reduced transaction costs, and improved efficiency in cross-border payments. However, these benefits are accompanied by significant challenges, including regulatory uncertainty, cybersecurity risks, and potential disruptions to monetary policy and financial stability. As digital currencies continue to evolve, their growing influence demands coordinated regulatory frameworks and technological adaptations within traditional financial institutions. This study contributes to a deeper understanding of how digital currencies impact economic structures, offering insights that can guide policymakers, financial institutions, and investors in navigating the transformation of financial ecosystems. By addressing both the advantages and challenges, the research highlights the importance of a balanced approach to digital currency adoption that fosters innovation while mitigating risks.

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.

Individuals' attitudes and their adoption intentions of central bank digital currency: Combining theories and analytics for deeper insights

Leveraging a multi-theoretical and multi-method approach, this study investigated the factors influencing individuals' attitudes and intentions towards adopting central bank digital currency (CBDC). Data from Nigeria, a pioneering CBDC nation, were analysed using partial least squares structural equation modelling, which revealed that affordance-based positive valences, including seamless transactions, time convenience, and the societal positive valence of financial inclusion, are the strongest predictors of positive attitudes and, subsequently, usage intentions. Perceived financial cost emerged as the most significant barrier. Lifestyle compatibility demonstrated a moderate positive association with attitude. Further, fuzzy-set qualitative comparative analysis identified four necessary conditions for high usage intentions: seamless transactions, trust in the central bank, positive attitude, and the societal positive valence of financial inclusion. Additionally, six alternative configurations sufficient for high usage intentions were also revealed. These findings offer valuable insights for both theoretical research and policymakers, informing strategies to facilitate early CBDC adoption.

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.

Retail CBDC: Implications for Banking and Financial Stability

This article reviews the literature examining how the introduction of a retail central bank digital currency (CBDC) would affect a modern economy, focusing on the implications for the banking sector and for financial stability. A CBDC can improve welfare by reducing financial frictions, countering market power in deposit markets, encouraging financial inclusion, and enhancing the payment system. However, a CBDC also entails noteworthy risks, including the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability. The recycling of the new CBDC liability through asset purchases or lending by the central bank plays an important role in determining the economic consequences of the introduction of a CBDC, raising fundamental questions about the footprint of central banks in the financial system. Ultimately, the effects of a CBDC depend critically on its design features, particularly remuneration.

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.

Does CBDC launch increase tax collection? empirical evidence from China

This study explores the impact of the introduction of Central Bank Digital Currency (CBDC) on tax collection. Using data from Chinese provinces between 2000 and 2021, it examines how the pilot launch of CBDC has influenced provincial tax revenues. A difference-in-differences estimation method is employed for the analysis. The empirical findings show that the adoption of CBDC in pilot provinces has led to higher tax collection compared to those that did not implement the pilot. A detailed analysis further reveals that this impact is more pronounced in smaller provinces. Furthermore, the CBDC launch has positively impacted on the collection of value-added tax (VAT), corporate income tax, and personal income taxes. These results provide empirical evidence of the CBDC's effect on tax collection and offer important insights for policymakers.

The impact of central bank digital currency on macroeconomic dynamics: A DSGE analysis

This study investigates the impact of Central Bank Digital Currency (CBDC) on macroeconomic fluctuations under various external shocks, expanding the research on macroeconomic effects of CBDC issuance. We develop a dynamic stochastic general equilibrium (DSGE) model to examine the effects of different external shocks on the macroeconomy under three scenarios with varying CBDC rules. Our analysis reveals that, in the presence of CBDC, macroeconomic variables are generally more volatile after exogenous shocks than in the absence of CBDC, while highlighting the crucial role of monetary policy in stabilizing the macroeconomy. Liquidity and substitution effects are identified as main drivers of the results. These findings offer new insights into the welfare improving effect of interest-bearing CBDC, carrying significant implications for the effective implementation of monetary policy.

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

Since 2020, the People’s Bank of China has promoted the pilot work on e-CNY payment, but it has not been widely used and popularized. The public still prefers third-party payment as the main payment method. In the incumbent literature, most studies on e-CNY payment focus on the macro perspective and less on users. Based on grounded theory and the push–pull-mooring framework, we investigate users’ intention to switch from third-party payment to e-CNY payment, and identify fee cost, system function overload, convenience, trust, inertia, and external influence as core factors. The theoretical model and research hypotheses are validated using structural equation modeling approach. Results show that system function overload, convenience, trust, and external influence significantly facilitate switching intention, whereas inertia negatively impedes switching intention. The findings of this study enrich the literature on e-CNY and serve as a reference for the promotion of central bank digital currencies around the world.

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.