Central Bank Digital Currency Can Lead to the Collapse of Cryptocurrency*

Abstract

The chapter evaluates how the demise of cryptocurrencies as a medium of exchange may result from the issue of digital money by central banks. To evaluate the likelihood that central bank digital money would cause the demise of cryptocurrencies, the research employs discourse analysis and literature review. In this chapter, I demonstrate how the issuing of a digital currency by a central bank might result in the demise of private digital currencies like bitcoin. I contend that central banks will make use of their monetary authority and the confidence that people have in currency guaranteed by the government. This might provide considerable motivation for central banks to launch their own digital money. The creation of a digital currency by a central bank has the potential to reduce confidence in cryptocurrencies, which might eventually cause them to collapse. The chapter is the first to argue that fiat digital money should prevail over private digital currency.

Citation

Ozili, P.K. (2023), "Central Bank Digital Currency Can Lead to the Collapse of Cryptocurrency*", Grima, S., Thalassinos, E., Cristea, M., Kadłubek, M., Maditinos, D. and Peiseniece, L. (Ed.) Digital Transformation, Strategic Resilience, Cyber Security and Risk Management (Contemporary Studies in Economic and Financial Analysis, Vol. 111A), Emerald Publishing Limited, Leeds, pp. 191-198. https://doi.org/10.1108/S1569-37592023000111A013