The Digital Economy, Privacy, and CBDC

57 Pages Posted: 27 May 2022

See all articles by Toni Ahnert

Toni Ahnert

European Central Bank, Financial Research Division; Centre for Economic Policy Research (CEPR); Systemic Risk Centre - LSE; Halle Institute for Economic Research

Peter Hoffmann

European Central Bank (ECB)

Cyril Monnet

University of Bern

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2022

Abstract

We study a model of financial intermediation, payment choice, and privacy in the digital economy. Cash preserves anonymity but cannot be used for more efficient online transactions. By contrast, bank deposits can be used online but do not preserve anonymity. Banks use the information contained in deposit flows to extract rents from merchants in need of financing. Payment tokens issued by digital platforms allow merchants to hide from banks but enable platforms to stifle competition. An independent digital payment instrument (a CBDC) that allows agents to share their payment data with selected parties can overcome all frictions and achieves the efficient allocation.

Keywords: Central bank digital currency, Digital Platforms, Financial Intermediation, Payments, privacy

JEL Classification: D82, E42, E58, G21

Suggested Citation

Ahnert, Toni and Hoffmann, Peter and Monnet, Cyril, The Digital Economy, Privacy, and CBDC (May 1, 2022). CEPR Discussion Paper No. DP17313, Available at SSRN: https://ssrn.com/abstract=4121505

Toni Ahnert (Contact Author)

European Central Bank, Financial Research Division ( email )

ECB Tower
Sonnemannstra├če 20
Frankfurt am Main

HOME PAGE: http://toniahnert.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Systemic Risk Centre - LSE ( email )

London
United Kingdom

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Peter Hoffmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Cyril Monnet

University of Bern ( email )

Gesellschaftsstrasse 49
Bern, BERN 3001
Switzerland

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