Predicting the Demand for Central Bank Digital Currency: A Structural Analysis with Survey Data

Many central banks are considering whether to issue a central bank digital currency (CBDC), which would allow people to have an account at the central bank itself. To inform this decision, policy-makers are interested in knowing how much of a CBDC people would hold and what design it should have. 

This paper predicts Canadian households’ potential holdings of a CBDC and how different design features of a CBDC would affect their potential holdings. I view a CBDC and its close alternatives, cash and bank deposits, as product bundles of different features. After estimating households’ preferences for each product feature, I can predict how much of a CBDC households would want to hold based on the design features of that CBDC.

I find that under a baseline design for a CBDC, households’ total CBDC holdings can range from 4 to 52 percent of their total liquid assets. I obtain the lower bound estimate if households perceive a CBDC to be closer to cash and the upper estimate if they perceive it to be closer to bank deposits. Important design features for a CBDC include its usefulness for budgeting, anonymity, bank service bundling and rate of return.