Speak Your Mind: CBDC Edition

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When designing a survey, one can refer to the vast body of academic research on best practices, or one cannot.

Here is a demonstration of one of these approaches:

Yes, OK. We’ve already had a pop at Deutsche Bank’s consumer opinion survey on crypto, but since its findings are back in the inbox today, here’s another one.

Compared to the previous examples, the above methodology is not bad. There is a “don’t know” disclaimer and an attempt to mitigate respondent bias when comparing acceptance of something that exists (crypto) to something that doesn’t (central bank crypto). The survey size, 4,850, is decent.

That question:

Regardless of what you have done in the past, if you had to use a cryptocurrency to pay for goods/services, would you rather use a cryptocurrency like bitcoin (or) a cryptocurrency administered by a central bank or government?

If there were no alternatives, would you rather be hit in the head or in the legs?

The number of people using crypto today to buy things is a rounding error. The Reserve Bank of Australia’s 2023 survey found that no more than 2% of adults said they use cryptocurrencies as a means of payment. The Fed’s 2023 banking and credit survey comes in at 1%, down from 2% in previous years. Sweden, a highly online and cashless nation, also sees crypto usage at 1%. And none of these surveys ask a follow-up question about whether the crypto payment was by choice (which is rarely offered when the good/service is ransom, extortion, guns, drugs, or murder).

It is reasonable to conclude that consumer appetite for crypto transactions is currently limited, making an expressed either/or preference almost irrelevant. The biggest surprise in the survey is that only half of people answered “don’t know” – although perhaps the zeros would have registered more with the “don’t care” option.

Central bank digital currencies are, however, a thing. The EU Governing Council began proper work on the digital euro last October, and the UK Treasury has until next year to decide on its CBDC strategy after launching a public consultation last February. The Bahamas, Nigeria and Jamaica have launched retail CBDCs, as has China, whose e-CNY is issued through authorized wholesale issuing banks, including Alipay and Tencent.

Deutsche finds that 94% of central banks are exploring CBDCs, although most are in the proof-of-concept stage.

However, even in countries with relatively young and/or unbanked populations, where peer-to-peer payments are common and mobile phone ownership is high, adoption has been unexpectedly slow. Nigeria’s population is 233 million and almost three years after its launch, eNaria has only created 13 million wallets.

Is there a backlogged request elsewhere? The survey says no:

Why? Are people concerned about privacy?

Yes and no. The vote between “crypto offers medium or high privacy” and “crypto offers little or no privacy” is pretty evenly split – though once again “don’t know” wins by a landslide:

(Enlarge)

Ignorance and apathy are in no way misunderstandings. It’s not up to customers to know what they want, as Steve Jobs may or may not have said. If the advantages of a CBDC in terms of cost, control and monitoring can be weighed against trade-offs such as weaker transmission of monetary policy and the potential to destabilize the banking system, the lack of consumer enthusiasm for a non-existent case can be overlooked.

But perhaps the CBDC projects we should be concerned with are wholesale, not retail. The retail payments developed in the market already work well enough for the public not to think about it, but there is always the possibility to make things on the back end a little faster or cheaper.

National banks in Switzerland, France and Singapore last year began testing whether it was worth settling interbank transactions with tokens. Singapore also has a joint project with the New York Fed, Cedar x Ubin+. which in sandbox tests can improve boarding and settlement speeds. Banque de France and the European Investment Bank have also experimented with chain tools.

The path to tokenizing settlement infrastructure is full of setbacks, but since the same is true of all infrastructure projects, we should keep our implicit cynicism in check.

All that remains then is a request. When considering retail CBDCs, the starting point must be what they will change, not how likely they are to be accepted, because at this point they promise to improve nothing and nobody but wonks and wingnuts care in any case.

Further reading
— Speak Your Mind: Crypto Edition (FTAV)
— The reasonable case against CBDCs (FTAVs)
— CBDCs must be coupled with greater accountability (FTAV)
— How many banks could break ECBitcoin? (FTAV)
— Leaning Into Britcoin, Parts One and Two (FTAV)