Cryptocurrencies, Central Bank Digital Cash, Traditional Money: Does Privacy Matter?

44 Pages Posted: 10 Dec 2018

See all articles by Donato Masciandaro

Donato Masciandaro

Bocconi University - Department of Economics

Alessandra Cillo

Bocconi University - Department of Decision Sciences

Emanuele Borgonovo

Bocconi University - Department of Decision Sciences

Stefano Caselli

Bocconi University - Department of Finance

Giovanni Rabitti

Bocconi University - Baffi Carefin Centre

Date Written: November 2018

Abstract

The aim of this paper is to analyze the demand of both traditional and new media of exchange – as cryptocurrencies and central bank digital currencies – proposing a novel specification of the demand for money. In this specification, the medium of payment (MOP) has three properties: the first two are the MOP’s standard functions as a medium of exchange and as a store of value, while the third is a novel function as a store of privacy (anonymity value). The proposed framework is tested using a laboratory experiment. Our results show that anonymity matters, but less of the other two properties; at the same time, the presence of anonymity increases the overall appeal of a MOP, particularly if the individuals are risk prone; given anonymity, the sacrifice ratio between liquidity risk and opportunity cost are relatively high.

Keywords: Money, Cryptocurrencies, Central bank Digital Currency, Cash, Baumol, Friedman, Experimental economics

JEL Classification: B22, D72, E41, E42, E52, E58, G38, G41, K42

Suggested Citation

Masciandaro, Donato and Cillo, Alessandra and Borgonovo, Emanuele and Caselli, Stefano and Rabitti, Giovanni, Cryptocurrencies, Central Bank Digital Cash, Traditional Money: Does Privacy Matter? (November 2018). BAFFI CAREFIN Centre Research Paper No. 2018-95. Available at SSRN: https://ssrn.com/abstract=3291269 or http://dx.doi.org/10.2139/ssrn.3291269

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Alessandra Cillo

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

Emanuele Borgonovo

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

Stefano Caselli

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Giovanni Rabitti

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

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