Confidence in digital money: Are central banks more trusted than age is matter?

Abstract

The virtual nature of digital money is fueling the conflict between usability, functionality and trust in the digital form. Institutional trust drivers should move forward in understanding the nature of confidence in digital money. Do central banks digital money (CBDC – central bank digital currency) and private cryptocurrencies demonstrate the same or different trust patterns? The paper used the general regression method to discover the relationship between trust in different forms of digital money and selected variables that may generate this trust. Simple empirical tests were sufficient to find the fundamental importance of age as a confidence driver relevant to CBDC and cryptocurrencies. It is found that traditional factors associated with the inflation history and quality of monetary order (central banks independence and rule of law) do not play a role in the case of CBDC, but are important in the case of cryptocurrencies. Structural features (like FinTech development or social trust) that should support trust in digital money are not found to be important. Societies with larger fraction of younger generations demonstrate higher confidence in centralized and decentralized forms of digital money. This challenges the traditional approach to money and calls into question the future role of monetary stability institutions in the digital age. Digitalization is perceived as an improvement in welfare only when fiat money institutions become fragile. The efficiency and credibility of central banks are not a bonus to confidence in CBDC. This is a challenge for the institutional design of the future digital-based monetary order.

The Effects of Central Bank Digital Currencies News on Financial Markets

“…To justify the selections of financial markets in our sample, we consider previous literature that reported which markets were susceptible to shocked transmitted from CBDCs, or reverse, were immunised from these shocks. According to the viewpoints expressed by the central banks around the world, a CBDC is a national tool to counter cryptocurrency volatility and uncertainty [Tronnier et al, 2020;Larina and Akimov, 2020;Lee et al, 2021a;Koziuk, 2021]. We thus hypothesise that CBDCUI and CBDCAI may have significant effects on cryptocurrency markets.…”

Motivations, Barriers and Risk-Taking When Investing in Cryptocurrencies

“…From the perspective of sociotechnical interaction, interestingly, not only the representatives of younger generations but also older generations are open to using cryptocurrency technology (within the meaning of funds or a value preserver) [13,15,60,61]. Despite the fact that, in the past, the successful implementation of new technologies required a kind of maturity in the younger generation, e.g., computerization in the 1980s and 1990s, where, although available to baby boomers, PCs were fully used only by Generation X, the real increase in work productivity associated with computerization and informatization was at an organizational level [62]-the cryptocurrency technology already has its motivated users.…”

“…Regrettably, only one of them directly concerned generation research [12]. Other articles only concern subsidiary research mentioning younger generations (see [13][14][15]).…”

What do cross-country Bitcoin holdings tell us? Monetary and institutional discontent vs financial development

“…And theoretical argumentation from the standpoint of collective experience and money as memory is the basis of the modern view of the nature of money as such (Schnabel & Shin, 2004;Milgrom & Stokey, 1982;Kocherlakota, 1996Kocherlakota, , 1998Algietta, 2002). At the same time, Koziuk (2021a) shows that economic agents do not perceive CBDC and privately issued digital money as the same asset class. In countries where central banks are more efficient and the inflation experience is less traumatic, trust in the CBDC is little different from trust in cryptocurrencies, but in countries with poorer monetary qualities, privately issued digital money are more trusted.…”