Monetizing Privacy with Central Bank Digital Currencies

34 Pages Posted: 20 May 2020 Last revised: 21 Sep 2022

See all articles by Rodney Garratt

Rodney Garratt

University of California, Santa Barbara (UCSB)

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Date Written: June 21, 2021

Abstract

In a market where consumers choose between payment options, and firms compete with products and prices, we show that payment data drives the formation of a market monopoly. A data sharing policy can successfully restore and maintain a competitive market, but often at the expense of both efficiency and consumer welfare. The introduction of a privacy-preserving central bank digital currency (CBDC), or digital cash, preserves the market structure and improves consumers’ welfare by enabling them to monetize their private information.

Keywords: Customer data, privacy, market structure, digital cash, payments

JEL Classification: E42, L11, L15

Suggested Citation

Garratt, Rodney and Lee, Michael, Monetizing Privacy with Central Bank Digital Currencies (June 21, 2021). Available at SSRN: https://ssrn.com/abstract=3583949 or http://dx.doi.org/10.2139/ssrn.3583949

Rodney Garratt

University of California, Santa Barbara (UCSB) ( email )

South Hall 5504

Michael Lee (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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