Falling Use of Cash and Demand for Retail Central Bank Digital Currency

25 Pages Posted: 30 Mar 2022

See all articles by Tanai Khiaonarong

Tanai Khiaonarong

International Monetary Fund (IMF)

David Humphrey

Florida State University

Date Written: February 1, 2022

Abstract

Cash use in most countries is falling slowly. On the margin, younger adults favor cash substitutes over cash. For older adults it is the reverse. Revealed preference tied to a changing population age structure seems to be the main influence on the demand for cash and why it is falling. Cash use may continue to fall, and card use (the main cash substitute) may fall by more, if CBDC is issued. The extent of this reduction depends on the demand for retail CBDC and the incentives (primarily transaction fees) that can play a determining role in CBDC adoption and use.

Keywords: Cash, card payments, payment substitution, central bank digital currency, cash share, cash use, cash substitute, use of cash, card substitution, Currencies, Central Bank digital currencies, Digital currencies, Household consumption, Payment systems, Africa

JEL Classification: E41, G21, D23, E42, R20

Suggested Citation

Khiaonarong, Tanai and Humphrey, David, Falling Use of Cash and Demand for Retail Central Bank Digital Currency (February 1, 2022). IMF Working Paper No. 2022/027, Available at SSRN: https://ssrn.com/abstract=4065446

Tanai Khiaonarong (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

David Humphrey

Florida State University ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-294-7896 (Phone)

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