Confidence in digital money: Are central banks more trusted than age is matter?

  • 60 Views
  • 6 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The virtual nature of digital money is fueling the conflict between usability, functionality and trust in the digital form. Institutional trust drivers should move forward in understanding the nature of confidence in digital money. Do central banks digital money (CBDC – central bank digital currency) and private cryptocurrencies demonstrate the same or different trust patterns? The paper used the general regression method to discover the relationship between trust in different forms of digital money and selected variables that may generate this trust. Simple empirical tests were sufficient to find the fundamental importance of age as a confidence driver relevant to CBDC and cryptocurrencies. It is found that traditional factors associated with the inflation history and quality of monetary order (central banks independence and rule of law) do not play a role in the case of CBDC, but are important in the case of cryptocurrencies. Structural features (like FinTech development or social trust) that should support trust in digital money are not found to be important. Societies with larger fraction of younger generations demonstrate higher confidence in centralized and decentralized forms of digital money. This challenges the traditional approach to money and calls into question the future role of monetary stability institutions in the digital age. Digitalization is perceived as an improvement in welfare only when fiat money institutions become fragile. The efficiency and credibility of central banks are not a bonus to confidence in CBDC. This is a challenge for the institutional design of the future digital-based monetary order.

view full abstract hide full abstract
    • Figure А1. Confidence in CBDC and central bank transparency
    • Figure А2. Confidence in CBDC and the rule of law
    • Figure А3. Confidence in privately issued digital money and central bank transparency
    • Figure А4. Confidence in privately issued digital money and the rule of law
    • Figure В1. Confidence in CBDC and power distance
    • Figure B2. Confidence in CBDC and social capital
    • Figure B3. Confidence in CВDC and social trust
    • Figure B4. Confidence in privately issued digital money and power distance
    • Figure B5. Confidence in privately issued digital money and social capital
    • Figure B6. Confidence in privately issued digital money and social trust
    • Figure C1. Confidence in CBDC and innovations
    • Figure С2. Confidence in CBDC and FinTech development
    • Figure С3. Confidence in privately issued digital money and innovations
    • Figure С4. Confidence in privately issued digital money and FinTech development
    • Figure D1. Confidence in CBDC and inflationary experience
    • Figure D2. Confidence in privately issued digital money and inflationary experience
    • Figure Е1. Confidence in CBDS and the fraction of younger generation
    • Figure Е2. Confidence in CBDS and life expectancy
    • Figure Е3. Confidence in CBDC and the fraction of older generation
    • Figure E4. Confidence in privately issued digital money and the fraction of younger generation
    • Figure Е5. Confidence in privately issued digital money and life expectancy
    • Figure Е6. Confidence in privately issued digital money and the fraction of older generation
    • Conceptualization
      Viktor Koziuk
    • Data curation
      Viktor Koziuk
    • Funding acquisition
      Viktor Koziuk
    • Formal Analysis
      Viktor Koziuk
    • Investigation
      Viktor Koziuk
    • Methodology
      Viktor Koziuk
    • Project administration
      Viktor Koziuk
    • Resources
      Viktor Koziuk
    • Writing – original draft
      Viktor Koziuk
    • Writing – review & editing
      Viktor Koziuk