Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any ...government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.
We provide a systematic classification and evaluation of the different types of digital currencies. We express skepticism regarding centralized digital currencies and focus our economic analysis on ...private digital currencies. We specifically highlight the potential for private digital currencies to improve welfare within an emerging market with a selfish government. In that setting, we demonstrate that a private digital currency not only improves citizen welfare but also encourages local investment and enhances government welfare. The fact that a private digital currency enhances government welfare implies a permissive regulatory policy which enables citizens to realize the previously referenced welfare gains.
Abstract
We study how introducing a central bank digital currency affects equilibrium allocations and welfare in an environment where both currency and bank deposits are used in exchange. We ...highlight an important policy tradeoff: while a digital currency tends to improve efficiency in exchange, it may also crowd out bank deposits, raise banks’ funding costs, and decrease investment. We derive conditions under which targeted digital currencies, which compete only with physical currency or only with bank deposits, raise welfare. If such targeted currencies are infeasible, we illustrate the policy tradeoffs that arise when issuing a single, universal digital currency.
•A signal index of CBDC reflecting its official attention was innovatively constructed.•The fintech index was extended to cover the determined time frame.•It was found the positively time-varying ...response of the fintech sector to the CBDC signals.•The response intensity of fintech sector to the CBDC signals was reducing over time.
This study analyzes how the fintech sector reacts to central bank digital currency (CBDC) signals released by central banks. First, we innovatively construct a signal index for the CBDC. Second, by collecting data from January 2012 to February 2022, the positively time-varying response of the fintech sector to the CBDC signals is found. Meanwhile, the response intensity reduces over time, thereby reflecting the weakening sensibility of the fintech sector to the CBDC signals. Third, shocks of symbolic events regarding the CBDC in the fintech sector are captured to further confirm the response to signals.
The decision to introduce a central bank digital currency (CBDC) is part of the new challenges that central banks are facing as technology keeps moving. The e-Peso pilot plan, implemented between ...2017 and 2018, could provide some key findings for central banks. In this sense, we can learn seven lessons from the e-Peso pilot plan: (i) reputation is key for central banks’ decision to introduce a CBDC; (ii) financial inclusion and cultural reasons are the main motivations; (iii) the technological solution as simple as possible; (iv) security aspects and traceable transfers are central for operational risk problems; (v) a token was a good solution for CBDC implementation; (vi) digital money was used for small payments and transfers; and (vii) CBDCs complement the existing means of payment. The conclusions highlight that CBDC choices are based not only on technical considerations but also on the cultural implications money use. The adoption of this new means of payment will be incremental but not reversible.
We examine implications of a central bank digital currency (CBDC) for banks using business models particularly dependent on customer deposits. Employing unique customer data hand-collected from ...German savings and cooperative banks, we generate conversion rates for deposits into a CBDC. Even at moderate conversion rates, most banks would have experienced funding problems and lost profits if a CBDC had been introduced in most years from 2000 onward. Our results are relevant for commercial banks, contributing to better assessments of the impact of CBDCs on liquidity and profitability and help central banks to identify implementation costs for banks within historical and hypothetical interest rate environments.
•We examine the implications of a CBDC introduction for highly deposit-dependent banks.•We calculate conversion rates based on hand-collected bank customer information.•We detect disintermediation effects in past and hypothetical monetary policy scenarios.•Central banks should consider consequences of deposit outflows for commercial banks.
