Central Bank Digital Currency Research Articles

Unveiling the influencing mechanism underlying users’ adoption and recommend intentions of central bank digital currency: A behavioral reasoning theory perspective

Despite the enormous benefits of the implementation of central bank digital currency (CBDC), the realization of these anticipated benefits depends on users' adoption and recommendations resulting from the consideration of both facilitators and inhibitors. Drawing on the behavioral reasoning theory (BRT), this study endeavors to unveil the influencing mechanism underlying users' CBDC adoption and recommend intentions using a hybrid approach integrating qualitative study (i.e., thematic analysis) and quantitative study (i.e., PLS-SEM). The qualitative research results indicate that relative advantage, incentive measures, government support, compatibility, and convenience are the “reasons for” users' CBDC adoption and recommend intentions, while tradition barrier, risk barrier, usage barrier, and image barrier are the “reasons against” users' CBDC adoption and recommend intentions. Further, the quantitative analysis of 638 pilot CBDC users suggests that users' CBDC adoption intentions positively influence their CBDC recommend intentions. “Reasons for” positively influence both users' attitudes and adoption intentions toward CBDC, whereas “reasons against” only negatively influence users' adoption intentions toward CBDC. Values (openness to change) positively influence users' “reasons for” and attitudes toward CBDC, and negatively influence users' “reasons against” adopting CBDC. Financial literacy strengthens the paths between “reasons for” and adoption intentions and weakens the paths between “reasons against” and adoption intentions. Theoretically, this study contributes by providing a thorough knowledge of users’ values, reasons, attitudes, and adoption and recommend intentions toward CBDC. Practically, this study renders insightful policy implications for central banks worldwide to promote CBDC applications.

Banking Crises Under a Central Bank Digital Currency (CBDC)

Abstract One of the main concerns associated with central bank digital currencies (CBDC) is the disintermediating effect on the banking sector in general, and the risk of bank runs in times of crisis in particular. This paper examines the implications of an interest-bearing CBDC on banking crises in a dynamic bank run model with a financial accelerator. The analysis distinguishes between bank failures due to illiquidity and due to insolvency. In a numerical exercise, CBDC leads to a reduction in the net worth of banks in normal times but mitigates the risk of a bank run in times of crisis. The financial stability implications also depend on how CBDC is accounted for on the asset side of the central bank balance sheet: if CBDC issuance is complemented by asset purchases, it delays the onset of both types of bank failures to larger shocks. In contrast, if CBDC issuance is complemented by loans to banks, it substantially impedes failures due to illiquidity, but only marginally affects bank failures due to insolvency.

Exploration of its Evolution, Implications, and Prospects within the Framework of Central Bank Digital Currency

Exploration of its Evolution, Implications, and Prospects within the Framework of Central Bank Digital Currency

Do CBDCs promote financial inclusion and strengthen the monetary regulations?

Digital currencies are impacting the financial lives of people and countries around the world; particularly developing countries see the retail Central Bank Digital Currencies (CBDCs) as an opportunity to increase financial inclusion and introduce new monetary policy implementation mechanisms. The decision to launch a digital currency mainly depends upon the goals and objectives being set by the Central Bank of any respective country. Digital currencies help to implement monetary policy more effectively to achieve the financial system stability. Kazakhstan is the leading economy in the Commonwealth of Independent States region; the digital payments market is changing rapidly in Kazakhstan, being driven by fintech innovations and public investments in payment technologies. In this article, we thoroughly discussed how launching of “Digital Tenge” is promoting financial inclusion and strengthening the monetary regulations across Kazakhstan. We took the case of Kazakhstan because it’s the first country from Central Asia which took the initiative of launching digital currency, and the National Bank of Kazakhstan has already announced that implementation of “Digital Tenge” would be completed in Kazakhstan by the end of 2025. The implementation of a “Digital Tenge” as a CBDC in Kazakhstan would expand the range of financial services being available to the nation. Having direct authority over the digital currency will empower the National Bank of Kazakhstan to adopt more efficient monetary policy, exerting influence over interest rates, money supply, and general economic stability. Furthermore, by providing digital financial services to marginalized communities, the digital Tenge would also help to solve the difficulties of financial inclusion in Kazakhstan. The article provides the possible policy routes for the governments of developing countries and the financial regulators about adopting CBDCs for promoting financial inclusion and to strengthen the monetary regulations.

Blockchain in Banking: Possible Use Cases and Benefits

Abstract Whilst Blockchain has usually been associated with Web3 and cryptocurrencies, that is, Decentralized Finance (DeFi), this technology can be used in countless other areas, such as banking, Central Bank Digital Currencies (cbdc s), healthcare, smart contracts, financial services, supply chain management, insurance, Internet of Things (IoTs), video games …, not much has been written about applying Blockchain technology to the traditional, Banking and Finance industry. This article will focus on how blockchain is or can be applied to the Banking industry, by analyzing a few possible use cases and its benefits, and, more importantly, it will also focus on whether it is worth it for the Banking industry to use it or not.

Modern Applications of Blockchain Technologies in Contemporary Times: A Systematic Review

Blockchain technology is one of the most innovative and versatile technological advancements of contemporary times, finding applications in various fields such as finance, healthcare, education, and real estate. This paper provides a systematic review of blockchain technology, its historical evolution, fundamental concepts, different types of blockchain, and its various applications. The study also explores the key characteristics of blockchain, including decentralization, transparency, and immutability, and discusses the challenges and limitations faced by the technology, such as scalability issues, security concerns, and regulatory challenges. Additionally, the paper looks into future trends and developments in blockchain technology, particularly advancements in consensus algorithms, integration with other emerging technologies, and the rise of Central Bank Digital Currencies (CBDCs) and Decentralized Finance (DeFi).

A novel central bank digital currency framework design for offline and foreign transactions based on blockchain

Purpose Fiat money production necessitates physical commodities, increasing costs and its flow is challenging to monitor, making it vulnerable to criminal exploitation. Cryptocurrencies offer decentralized solutions, but their decentralization has led to illegal activities. Current cross-border transactions face high costs, resource intensity and lack of instant currency transfers. Offline transactions are essential in unreliable networks. Design/methodology/approach Here, the authors proposed the methodology to perform offline transactions based on card, quick response (QR) code and a foreign transaction framework with universal identification (UID) to perform cross-border transactions using blockchain-dependent central bank digital currencies (CBDCs). Implications for the financial system are also analyzed. Findings The proposed CBDC framework reduces illegal transactions, corruption and the cost of producing fiat money; eases overseas transactions; and eventually increases international tourism, trade and business between countries. It also reduces the processing fees. Offline framework found useful for performing retail-level transactions. Research limitations/implications The research methodology may face limitations due to diplomatic relations, political instability, sanctions and the need for robust offline transaction infrastructure. Practical implications The proposed CBDC framework simplifies debt and insurance management, tax collection, international trade, tourism and global stock market participation. However, implementing CBDCs in low-income countries presents challenges like extensive training, infrastructure and user acceptance issues. Social implications The adoption of CBDCs can enhance financial stability by reducing corruption and illegal transactions through improved traceability and monitoring, thereby curbing activities like terrorism. Originality/value Common framework for foreign transactions is based on the UID, and offline transaction framework is based on the sender’s QR code for multiple user applications.

Central bank digital currencies – a bibliometric analysis on research themes in pursuit of research trends

Central bank digital currencies – a bibliometric analysis on research themes in pursuit of research trends

Blockchain technology in financial services: enhancing security, transparency, and efficiency in transactions and services

Blockchain technology revolutionizes financial services by enhancing security, transparency, and efficiency in transactions and services. This paper examines the fundamental aspects of blockchain, including its core concepts and components, and explores its application in financial services. Blockchain's cryptographic hashing, decentralization, and immutability significantly improve security by preventing tampering and reducing fraud risks. Increased transparency through immutable audit trails, real-time updates, and open ledgers fosters trust among customers, regulators, and institutions. Furthermore, blockchain streamlines operations by automating processes, reducing intermediaries, and expediting transactions, resulting in substantial cost reductions and improved efficiency. Despite these advantages, challenges such as scalability, interoperability, regulatory uncertainty, and environmental impact must be addressed for widespread adoption. The prospects of blockchain in financial services are promising, with potential applications in decentralized finance, digital identity verification, and central bank digital currencies. This paper underscores the transformative potential of blockchain technology in creating a more secure, transparent, and efficient financial ecosystem.

Acceptance of IoT-based E-coin Track-and-trace: A Case of the Digital Euro Project in Italy

As the world becomes increasingly digitalised, there are growing concerns about the use of big data and machine learning techniquesto monitor and control citizens’ spending habits. This is particularly the case regarding Central Bank Digital Currencies (CBDC), whichare being trialled by an increasing number of countries. There is a perception that such currencies could violate privacy due to thecentralisation of money liability. The aim of this research is to assess whether a universal e-coin level tracking service of money and public expenditures, available to everyone and inspired by Internet of Things (IoT) architectures and standards, could instil trust ininstitutions while increasing the acceptance of CDBCs. The research methodology comprises three key elements: (i) the conceptualisation and implementation of an IoT-based CBDC, (ii) a qualitative, technical and compliance assessment with regard to the specific reference to the Digital Euro (D€) project, and (iii) a survey we conducted among 351 respondents to ascertain the potential for CBDC acceptance within Italy. The results demonstrate that the prototype is a viable concept despite storage limitations. Furthermore, 73.83 percent of respondents who initially expressed scepticism indicated that they would be more inclined to adopt the CDBC instrument if a universal track-and-trace tool of money were made available.

E-Rupee: Unlocking India's Digital Economy, Challenges, and Opportunities

This paper explores the concept of digital currency, differentiating between digitization and digitalization, and analyzes its different forms, specifically centralized and decentralized digital currencies. The analysis comprehensively examines Central Bank Digital Currencies (CBDCs), specifically focusing on India's e-rupee. It delves into the various forms of CBDCs, their management strategies, and the potential economic consequences they may have. The significance of digital currency in promoting financial inclusion, improving transaction efficiency, and influencing monetary policy is emphasized. Moreover, the study discusses the difficulties and dangers linked to the deployment of digital money, such as cyber-attacks, financial instability, privacy issues, and regulatory obstacles. The paper emphasizes the significance of strong risk management systems and consistent monitoring to guarantee the efficiency and safety of digital currencies. This study offers unique insights into the revolutionary potential of digital currencies and the strategic considerations required for their effective adoption by conducting a thorough assessment of the digital currency ecosystem. Moreover, the emergence of the 4th Industrial Revolution (4.0), driven by digital technologies, is transforming industries on a global scale within the field of agriculture, digitalization is transforming farming methods by implementing smart farming, precision agriculture, and digital agriculture. This paper also provides the guidelines for mitigating operational risks associated with digital currency, which may be found in the NIST Risk Management Framework and the CPMI-IOSCO Principles for Financial Market Infrastructures. Ultimately, the embrace of digital currencies and the digitization of numerous industries have the potential to stimulate economic growth, enhance financial accessibility, and proper technological advancement.

A multi-jurisdictional perspective: To what extent can cryptocurrency be regulated? And if so, who should regulate cryptocurrency?

This article addresses the need for effective cryptocurrency regulation considering its volatile nature, recent investment surges, and subsequent financial crashes. It explores various approaches to cryptocurrency regulation, examining different jurisdictions’ approaches towards cryptocurrency’s classification as a security, commodity, or property. For countries to efficiently regulate the global threat that cryptocurrency has the potential to be, regulatory methods that are currently being used on a domestic scale need to be addressed and evaluated for international effectiveness. The article begins by defining cryptocurrency and reviewing the recent events that have intensified the regulatory race, such as crypto crazes and crypto crashes. It analyses different regulatory approaches, highlighting which countries view cryptocurrency as a security, commodity, or property, and examines the necessity for international harmonisation. It then examines the introduction of Central Bank Digital Currencies, evaluating it as the potential step forward and identifying the impact it could have.

Privacy implications of central bank digital currencies (CBDCs): a systematic review of literature

This study employs a systematic review of the literature to critically analyze the privacy implications of central bank digital currencies (CBDCs). Against the backdrop of a global digital revolution spurred by financial crises and the rise of cryptocurrencies, the emergence of CBDCs has garnered substantial attention from central banks worldwide. The study’s main objective is to fill a significant gap in the literature by providing an evidence-based assessment of the privacy issues of CBDCs. Through a meticulous analysis of the 46 selected papers, the study identifies key findings, including diverse perspectives on CBDC models, aspects and gaps in CBDC research, and various privacy concerns, such as extensive data collection in the direct CBDC model, challenges related to central bank data retention in the hybrid CBDC model, and increased operational complexity in the intermediated CBDC approach associated with CBDC implementation. The critical analysis points toward the urgent need for more extensive research into the privacy and security aspects of CBDCs to ensure user protection and trust. The findings contribute valuable insights for policymakers, regulators, and stakeholders in shaping the responsible creation and use of CBDCs.

CBDC and the Banking System

Abstract This paper examines the potential impact a central bank digital currency (CBDC) on banks’ balance sheets. We first analyze the possible implications of the introduction of a CBDC for the banking system and the economy as a whole. Our analysis indicates that the impact of a CBDC depends on a number of design choices and on how credit institutions re-optimize their balance sheets in response to the outflow of deposits caused by the substitution of private money with public digital money. We then present a series of illustrative simulations on the impact of a CBDC on the funding structure and profitability of credit institutions using data on Italian banks between June 2021 and March 2023. The analysis suggests that the overall impact on banks’ funding could be manageable in the presence of individual holding limits and in an environment characterized by ample liquidity and stable funding for credit institutions. The cost of covering the reduction of deposits would be relatively higher for intermediaries with low excess reserves and for those that may need to issue long-term liabilities to maintain stable funding levels above regulatory requirements.

Predicting cryptocurrency price trends using artificial intelligence methods

This article comprehensively explores multiple aspects of cryptocurrencies and their price forecasting. Firstly, the article introduces the definition of cryptocurrency and its development process on a global scale, especially focusing on the launch of Facebook Libra and China's central bank digital currency, highlighting the importance and influence of digital currency in the global financial market. Subsequently, the article analyzes the advantages of digital currencies over traditional currencies, including improving economic transaction efficiency, reducing transaction costs and enhancing transaction transparency. Finally, through specific experimental analysis, the effectiveness of using the deep learning model CNN-LSTM to predict the price of Bitcoin is demonstrated, and the directions of future research and optimization strategy are proposed. In summary, this paper comprehensively presents the research status and prospects of cryptocurrency and its price prediction field through systematic introduction and analysis.

Blockchain Innovation: Enhancing Security and Clarity in Digital Exchanges

Blockchain technology, which was originally intended for cryptocurrency transactions, has grown into a transformative tool for improving security and transparency in a variety of industries. This research paper examines blockchain mechanisms such as decentralisation, cryptographic security, and consensus algorithms, emphasising their importance in ensuring data integrity and transparency. The broad impact of blockchain is demonstrated through applications in financial services, supply chain management, healthcare, digital identity verification, real estate, and public services. Despite challenges such as scalability, regulatory issues, and energy consumption, blockchain offers significant benefits in terms of fraud prevention, cost savings, and efficiency. Future possibilities include combining blockchain with emerging technologies such as AI and IoT, central bank digital currencies, and more energy-efficient consensus mechanisms. This study emphasises blockchain's crucial role in improving digital exchanges and its potential to revolutionise them. Key Words: Blockchain technology, security, transparency, digital transactions, decentralization, cryptographic security, smart contracts

Central bank digital currency and financial inclusion

This paper develops a model to incorporate the impact of financial inclusion to study the implications of issuing a CBDC. In a “two-tier” model where banks distribute CBDC, CBDCs have the potential to increase the supply of deposits by incentivizing the unbanked to open bank accounts (offsetting potential flows from deposits to CBDCs), boosting overall lending. This is more likely when CBDC is valuable as a means of payment, provides anonymity in payments, and/or offers remuneration, especially in developing countries where the size and relative wealth of the previously unbanked population is large. CBDC can be optimal for household welfare even when overall lending decreases as households benefit from the value of using CBDC for payments and as an alternative “safe” savings vehicle.

A proposal for a layer-2 CBDC on a rollup

This paper presents a proposal for introducing a central bank digital currency (CBDC) within a permissionless blockchain environment, specifically utilizing a layer 2 rollup. Several factors make exploring a CBDC on a blockchain worthwhile, including the potential demand for public money on blockchains and leveraging blockchain fundamentals for programmable payments. While the issuance of CBDC on a layer 1 blockchain may be a straightforward approach, it comes with drawbacks such as dependencies on network rules and limited privacy. Instead, I propose a design where an intermediated CBDC is issued on layer 2 through a zk-rollup architecture by licensed financial intermediaries who also provide tokenized deposits on layer 1. This paper delves into the technical specifications, economic considerations, as well as the advantages and limitations of this proposed design.

Currency Evolution: A Comparative Study Between Central Bank Digital Currencies And Physical Currencies In Modern Monetary Systems

Technology and innovation are the keys used to unlock the impossible imagination to become possible to achieve the unforeseen goals of individuals and organizations. This study focuses on the role of an unprecedented phenomenon called central bank digital currency (CBDC) over physical currency. This study uses a descriptive research method with a quantitative approach. This study is a literature review study aimed at describing the phenomenon. This study assesses the role of CBDC based on three parameters such as features, perceived benefits and challenges of CBDC and Physical Currency. It also reveals that CBDC can replace the use of physical currency only depending on how people, businesses perceive the features, benefits (better allocation, accessibility, interest bearing, convertibility and reduced costs) and possible challenges (opposite of benefits) associated with CBDC compared to its counterpart.

Is CBDC undermining the Process of Money Creation?

ABSTRACT Several policymakers and academic works have been discussing the nature of Central Bank Digital Currency (CBDC) as well as its debated relationship with crypto-assets. CBDC would allow the private (non-financial) sector to access the central bank’s reserves. Given its superior hierarchy in the money spectrum, CBDC adoption could trigger a strong or mild conversion from deposits, depending on its design, with strong impacts on the assets and liabilities composition and magnitude of different actors. The aim of this paper is to study the dynamics related to the transmigration process from deposits to CBDC as well as the process of money creation through a detailed step-by-step analysis, tracking the transactions between the institutions involved in its adoption. It underlines the validity of the endogenous money theory (EMT) in describing those transactions while clarifying the maintenance of the commercial banks’ vital role in the process of money creation, in a world with the emergence of CBDC.