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Monetizing Privacy with Central Bank Digital Currencies

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Abstract

In prior research, we documented evidence suggesting that digital payment adoptions have accelerated as a result of the COVID-19 pandemic. While digitalization of payment activity improves data utilization by firms, it can also infringe upon consumers’ right to privacy. Drawing from a recent paper, this blog post explains how payment data acquired by firms impacts market structure and consumer welfare. Then, we discuss the implications of introducing a central bank digital currency (CBDC) that offers consumers a low-cost, privacy-preserving electronic means of payment—essentially, digital cash.

Suggested Citation

  • Rod Garratt & Michael Junho Lee, 2020. "Monetizing Privacy with Central Bank Digital Currencies," Liberty Street Economics 20201123, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:89084
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    More about this item

    Keywords

    central bank digital currencies; privacy; market structure; data;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • 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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