Evaluating Effects of the Payment Ecosystem on Central Bank Digital Currency Adoption and Design

Abstract

Central bank digital currency (CBDC) has become a discussion topic with worldwide economic and societal relevance. Payment system efficiency is a top driver for digital currency adoption. We examine literature gaps for payment ecosystem impact for adoption and design and conduct a test for 65 World Bank countries. We assess payment alternatives and preference impacts and estimate least squares and limited dependent variables regressions based on cross-national data. CBDC adoption is driven by payment ecosystems, alternative payment characteristics, e-money usage, perceived security, and infrastructure. This signals that user familiarity with digital payments, trust in authorities, and structural capabilities support adoption. It also is inversely related to alternatives that dampen the need for CBDC. Transaction volume and trust in authorities are linked to choosing a central database instead of a digital ledger technology infrastructure. Deviations occur due to ambiguous effects of cash and ledger technology usage for CBDC adoption and industry concentration, architecture, and systems linkages.