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Currency digitalization: The supply, demand, and infrastructure aspects of china's central bank digital currency

Author

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  • Zeng, Linshan
  • Young, Martin R.
  • Hao, Wei

Abstract

This paper studies how digitalization affects the adoption of China’s central bank digital currency (e-CNY). Utilizing provincial-level panel data from 2011 to 2021, we examine the impacts of "Breadth of Digitalization Coverage" and "Digitalization Level" on the supply and demand dynamics of e-CNY. Our findings show that digitalization reduces both the supply and demand of physical currency. This decreasing reliance on physical currency implies that digitalization has paved the way for adopting e-CNY. We further investigate the infrastructural factors that support digitalization progression and e-CNY’s implementation. Our results suggest that the transition from physical to digital currency is jointly driven by wallet digitalization (enabled by smartphones) and payment scenario digitalization (supported by e-commerce). Our result findings provide implications to both China and other countries developing CBDC initiatives.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012590
    DOI: 10.1016/j.frl.2025.108001
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    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services

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