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Cash use across countries and the demand for central bank digital currency

Author

Listed:
  • Khiaonarong, Tanai

    (Senior Financial Sector Expert, International Monetary Fund, USA)

  • Humphrey, David

Abstract

Within any country, the demand for central bank digital currency (CBDC) will be influenced by trends in the level of cash use. While having access to digital currency is more convenient than having to travel to an automated teller machine, this only makes digital currency as convenient as a bank debit card — not better. Demand for digital currency will thus be weak in countries where the adoption of cash substitutes (eg cards, electronic money, mobile phone payments) has suppressed demand for cash. By contrast, where cash use is high due to a lack of substitutes, demand for digital currency should be stronger. Building on the observation that demand for CBDC is tied to the current level of cash use, this paper uses four measures to assess trends in the demand for cash in 11 countries. A tentative forecast of cash use is also made. After showing that declining cash use is largely associated with demographic change, the study ties the level of cash use to the likely demand for CBDC in different countries. In this process, it is suggested that one measure of cash use is more useful than the others.

Suggested Citation

  • Khiaonarong, Tanai & Humphrey, David, 2019. "Cash use across countries and the demand for central bank digital currency," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 13(1), pages 32-46, March.
    • Handle: RePEc:aza:jpss00:y:2019:v:13:i:1:p:32-46
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    Citations

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    Cited by:

    1. Zeng, Linshan & Young, Martin R. & Hao, Wei, 2025. "Currency digitalization: The supply, demand, and infrastructure aspects of china's central bank digital currency," Finance Research Letters, Elsevier, vol. 85(PB).
    2. Peterson K. Ozili, 2022. "Circular Economy and Central Bank Digital Currency," Circular Economy and Sustainability, Springer, vol. 2(4), pages 1501-1516, December.
    3. Jakšić Milena & Todorović Violeta & Matić Jelena, 2022. "The Influence of Digital Currency on the Banking Sector in Europe," Economic Themes, Sciendo, vol. 60(4), pages 481-494, December.
    4. Michele Manna, 2022. "The bonfire of banknotes," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 25, Bank of Italy, Directorate General for Markets and Payment System.
    5. Prescott, Brian C. & Shy, Oz, 2023. "Cash payments and the penny policy debate," Journal of Economic Behavior & Organization, Elsevier, vol. 208(C), pages 80-94.
    6. Vollmar, Steffen & Wening, Fabian, 2024. "The impact of CBDC on a deposit-dependent banking system," Journal of Financial Stability, Elsevier, vol. 73(C).
    7. Adrian Matthew Glova & Roy Hernandez, 2025. "Forecasting currency in circulation with the central bank balance sheet," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 62(1), pages 27-55, June.
    8. FUJIKI, Hiroshi, 2025. "Cash Demand and Demographic Changes in Japan," Discussion paper series HIAS-E-145, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    9. Xin, Baogui & Jiang, Kai, 2023. "Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis," Research in International Business and Finance, Elsevier, vol. 64(C).
    10. Li, Fangmin & Yang, Tianle & Du, Min & Huang, Miao, 2023. "The development fit index of digital currency electronic payment between China and the one belt one road countries," Research in International Business and Finance, Elsevier, vol. 64(C).
    11. Nwamaka A. Anaza & Delancy H. S. Bennett & Yana Andonova & Emeka Anaza, 2022. "DPS 2.0: on the road to a cashless society," Marketing Letters, Springer, vol. 33(4), pages 693-704, December.
    12. Ozili, Peterson K, 2025. "100 Quotes about central bank digital currencies," MPRA Paper 124263, University Library of Munich, Germany.
    13. Si Chen, 2022. "Cryptocurrency Financial Risk Analysis Based on Deep Machine Learning," Complexity, John Wiley & Sons, vol. 2022(1).
    14. Berg, Tobias & Keil, Jan & Martini, Felix & Puri, Manju, 2024. "CBDCs, Payment Firms, and Geopolitics," CEPR Discussion Papers 19367, Centre for Economic Policy Research.
    15. Shalva Mkhatrishvili & Wim Boonstra, 2022. "What we know on Central Bank Digital Currencies (so far)," NBG Working Papers 01/2022, National Bank of Georgia.
    16. Nadia Pocher & Andreas Veneris, 2022. "Central Bank Digital Currencies," Springer Optimization and Its Applications, in: Duc A. Tran & My T. Thai & Bhaskar Krishnamachari (ed.), Handbook on Blockchain, pages 463-501, Springer.
    17. Gordon Kuo Siong Tan, 2022. "Citizens go digital: A discursive examination of digital payments in Singapore’s Smart Nation project," Urban Studies, Urban Studies Journal Limited, vol. 59(12), pages 2582-2598, September.
    18. Hoang, Yen Hai & Ngo, Vu Minh & Bich Vu, Ngoc, 2023. "Central bank digital currency: A systematic literature review using text mining approach," Research in International Business and Finance, Elsevier, vol. 64(C).
    19. Sofia Priazhkina & Samuel Palmer & Pablo Martín-Ramiro & Román Orús & Samuel Mugel & Vladimir Skavysh, 2024. "Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm," Staff Working Papers 24-17, Bank of Canada.
    20. World Bank & Bank for International Settlements, 2022. "What Does Digital Money Mean for Emerging Market and Developing Economies?," World Bank Publications - Reports 37358, The World Bank Group.
    21. Ozili, Peterson K, 2024. "Thinking Fast and Slow about Central Bank Digital Currencies," MPRA Paper 120774, University Library of Munich, Germany.
    22. Hwang, Jen-Te & Wen, Min, 2024. "Electronic payments and money demand in China," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 47-64.
    23. C, Viviana Alfonso & Kamin, Steven & Zampolli, Fabrizio, 2025. "Central bank digital currencies (CBDCs) in Latin America and the Caribbean," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 6(1).

    More about this item

    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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