(Bloomberg) — Central banks will likely have a much tougher time getting consumers to use their digital money than they do issuing them, according to researchers from European Central Bank.
(Bloomberg) — Central banks will likely have a much tougher time getting consumers to use their digital money than they do issuing them, according to researchers from European Central Bank.
While ongoing discussions by policy makers and academics often don’t touch on adoption of digital currencies or assume it’s “a given,” broader adoption might in fact force central banks to weigh difficult trade-offs, the ECB paper by Alejandro Zamora-Perez, Eliana Coschignano and Lorena Barreiro said.
Previous and ongoing experiments in countries like Ecuador with central-bank-issued digital currencies are limited and provide little insights but they do reveal it hasn’t always been easy to convince consumers or merchants to use them, the paper said.
Global central banks including the ECB are still exploring the benefits and drawbacks of issuing digital money. The ECB has indicated that it could launch a digital euro as early as the middle of this decade and is even examining whether it should award it legal-tender status.
“Central banks may find themselves on the horns of a dilemma in seeking to balance” certain policy goals, broader adoption, and potential adverse economic effects, according to the paper.
For instance, while replicating certain features of traditional cash — such as its highly sought-after store-of-value function — could make a digital currency attractive for users and possibly expand its role in retail transactions, central banks might want to prevent competing with commercial banks for deposits.
“Deciding between these two options may depend on the central bank’s hierarchy of desired policy goals,” the researchers said, such as weighing improvements in retail payment markets against financial stability concerns.
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