Exploring the Factors Affecting Countries’ Adoption of Blockchain-Enabled Central Bank Digital Currencies

Abstract

Central bank-issued digital currencies have sparked significant interest and are currently the subject of extensive research, owing to their potential for rapid settlement, low fees, accessibility, and automated monetary policies. However, central bank digital currencies are still in their infancy and the levels of adoption vary significantly between nations, with a few countries seeing widespread adoption. We used partial least squares structural equation modeling to investigate the nonlinear relationship between key national development indicators and central bank digital deployment across 67 countries. We explore the technological, environmental, legal, and economic factors that affect central bank digital currency adoption by country. We found a statistically significant and positive correlation between countries’ central bank digital currency adoption status and a country’s level of democracy and public confidence in governance, and a negative association between regulatory quality and income inequality. There was no significant association between countries’ central bank digital currency adoption status and their level of network readiness, foreign exchange reserves, and sustainable development goal rank. Thus, we posit that a country that is highly democratic and has good governance adopts central bank digital currencies more readily than others. Based on our findings, we suggested areas for additional research and highlighted policy considerations related to the wider adoption of central bank digital currency.