Valuing Safety and Privacy in Central Bank Digital Currency

Central banks around the world are researching and piloting retail Central Bank digital Currency (CBDC), which is akin to a digital version of physical currency that is universally accessible to the public. To understand the merits of issuing retail CBDC, central banks need to understand the prospects for take-up by the public. With very high take-up, a CBDC risks impairing the local banking sector and the provision of credit. With very low take-up, a CBDC risks wasting the public resources used to create and manage the platform infrastructure.

In this paper we explore the prospects for CBDC take-up in an Australian setting, investigating two determinants:
- How much would Australians value having access to a digital form of money that represents a claim on the RBA, rather than a commercial bank?
- To what extent would design choices about privacy affect take-up?

Central bank representatives from several advanced economies have opined that most people in their jurisdictions do not appreciate the differences in safety between a claim on a central bank and a commercial one (Balz 2022, Brainard 2022). These views are consistent with the results of ECB focus group consultations (Kantar Public 2022) and surveys conducted in Austria (Abramova et al 2022). Central banks have also investigated privacy preferences, albeit with more mixed results. For example, people responding to CBDC consultation papers have generally expressed strong preferences for privacy (Bank of England 2021, European Central Bank 2021, RBNZ 2022). ECB focus group consultations, which use representative samples, reveal much weaker preferences (Kantar Public 2022). These investigations all use stated preference data because no advanced economy central banks have issued retail CBDCs from which to learn.

Our work has two distinguishing features from these earlier efforts. First, we focus on Australia, because findings from overseas do not necessarily apply here. For example, earlier work has shown that privacy preferences can differ markedly even across neighbouring countries (European Central Bank 2021). Second, we use the “discrete choice experiment” survey technique. This technique has been designed explicitly for the purpose of assessing public valuations of goods or services that do not have markets, and doing so in such a way that addresses common concerns with stated preferences analysis. We run our experiment in the 2022 Consumer Payments Survey, which
is a large, nationally representative survey of payments behaviour in Australia. As far as we are aware, we produce the first estimates of willingness to pay for CBDC attributes in the literature.