Digital Currency and Privacy

45 Pages Posted: 7 May 2021 Last revised: 23 Feb 2023

Date Written: May 3, 2021


We develop a monetary model in which a private company issues digital currency and uses payment data to estimate consumers' preferences. Sellers purchase preference information to produce goods that better match consumers' preferences. A monopoly arises in the digital currency industry, and digital currency is not issued if the inflation rate is sufficiently high. Due to reinforcing interactions between the value of preference information and trade volume, multiple equilibria (with and without digital currency) can exist depending on market structures for monetary exchanges. When left to market forces alone, socially efficient uses of payment data may not occur.

Keywords: Digital currency, Privacy, Transaction data, Preference information, Strategic complementarities

JEL Classification: E12, E40, E50, G10

Suggested Citation

Kang, Kee-Youn, Digital Currency and Privacy (May 3, 2021). Available at SSRN: or

Kee-Youn Kang (Contact Author)

Yonsei University ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 120-749
Korea, Republic of (South Korea)

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