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Central Bank Digital Currency Can Lead to the Collapse of Cryptocurrency

In: Digital Transformation, Strategic Resilience, Cyber Security and Risk Management

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  • Peterson K. Ozili

Abstract

The chapter evaluates how the demise of cryptocurrencies as a medium of exchange may result from the issue of digital money by central banks. To evaluate the likelihood that central bank digital money would cause the demise of cryptocurrencies, the research employs discourse analysis and literature review. In this chapter, I demonstrate how the issuing of a digital currency by a central bank might result in the demise of private digital currencies like bitcoin. I contend that central banks will make use of their monetary authority and the confidence that people have in currency guaranteed by the government. This might provide considerable motivation for central banks to launch their own digital money. The creation of a digital currency by a central bank has the potential to reduce confidence in cryptocurrencies, which might eventually cause them to collapse. The chapter is the first to argue that fiat digital money should prevail over private digital currency.

Suggested Citation

  • Peterson K. Ozili, 2023. "Central Bank Digital Currency Can Lead to the Collapse of Cryptocurrency," Contemporary Studies in Economic and Financial Analysis, in: Digital Transformation, Strategic Resilience, Cyber Security and Risk Management, volume 111, pages 191-198, Emerald Group Publishing Limited.
  • Handle: RePEc:eme:csefzz:s1569-37592023000111a013
    DOI: 10.1108/S1569-37592023000111A013
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    Cited by:

    1. Ozili, Peterson K, 2024. "Thinking Fast and Slow about Central Bank Digital Currencies," MPRA Paper 120774, University Library of Munich, Germany.

    More about this item

    Keywords

    Central bank digital currency; cryptocurrency; bitcoin; blockchain; distributed ledger; payment system; central banks; digital innovation; cryptoassets; stablecoin; COVID-19; fiat digital currency; E42; E58; G21; G28’ O33;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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