Monetizing Privacy with Central Bank Digital Currencies
26 Pages Posted: 20 May 2020 Last revised: 21 Jun 2021
Date Written: June 21, 2021
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: Suggested Citation