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The digital economy, privacy, and CBDC

Author

Listed:
  • Ahnert, Toni
  • Hoffmann, Peter
  • Monnet, Cyril

Abstract

We study a model of financial intermediation, payment choice, and privacy in the digital economy. While digital payments enable merchants to distribute their goods online, they also reveal information to banks. By contrast, cash only allows for inefficient offline sales, but guaran-tees anonymity. In equilibrium, merchants trade off the efficiency gains from online distribution (with digital payments) and the informational rents from staying anonymous (with cash). The introduction of central bank digital currency (CBDC) raises welfare because it reduces the privacy concerns associated with online distribution. Payment to-kens issued by digital platforms crowd out CBDC unless the latter facilitates data-sharing. JEL Classification: D82, E42, E58, G21

Suggested Citation

  • Ahnert, Toni & Hoffmann, Peter & Monnet, Cyril, 2022. "The digital economy, privacy, and CBDC," Working Paper Series 2662, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20222662
    Note: 848910
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    Citations

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    Cited by:

    1. Magin, Jana Anjali & Neyer, Ulrike & Stempel, Daniel, 2023. "The macroeconomic effects of different CBDC regimes in an economy with a heterogeneous household sector," DICE Discussion Papers 396, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Charles M. Kahn & Maarten R.C. van Oordt, 2022. "The Demand for Programmable Payments," Tinbergen Institute Discussion Papers 22-076/IV, Tinbergen Institute.
    3. Keister, Todd & Monnet, Cyril, 2022. "Central bank digital currency: Stability and information," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    4. Magin, Jana & Neyer, Ulrike & Stempel, Daniel, 2023. "The Macroeconomic Effects of Different CBDC Regimes in an Economy with a Heterogeneous Household Sector," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277656, Verein für Socialpolitik / German Economic Association.
    5. Alexis Derviz, 2023. "Foreign Exchange Implications of CBDCs and Their Integration via Bridge Coins," Working Papers 2023/7, Czech National Bank.
    6. Wang, Chien-Chiang & Li, Yiting, 2023. "Anonymous credit," MPRA Paper 118480, University Library of Munich, Germany.
    7. Mishra, Bineet & Prasad, Eswar, 2023. "A Simple Model of a Central Bank Digital Currency," IZA Discussion Papers 16154, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Central Bank digital currency; digital platforms; financial intermediation; payments; privacy;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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

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