The six ways to build trust and reduce privacy concern in a Central Bank Digital Currency (CBDC)

Abstract

A Central Bank Digital Currency (CBDC) can offer several benefits for governments and citizens such as faster transactions at a lower cost, and richer information on consumers’ behaviour. It is important however that the consumer’s perspective on the adoption of CBDCs is not neglected. A CBDC needs consumers to trust and use it, to avoid either a complete failure, or a partial failure. A partial failure may lead to CBDCs being one of two parallel systems’ consumers use. This research uses a survey analysed by structural equation modelling to identify the six ways to build trust in a CBDC so it can be successfully adopted and used extensively: (1) Trust must be built in the government and the central bank issuing a CBDC, (2) expressed guarantees for the user of a CBDC must be provided, (3) the positive reputation of existing CBDCs active elsewhere must be utilized, (4) the automation and reduced human involvement achieved by a CBDC technology can be helpful, (5) specific trust building functionality of a CBDC can be utilized, and (6) specific privacy features of the CBDC wallet app and back-end processes such as anonymity can be beneficial.

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ORCID for Alex Zarifis: orcid.org/0000-0003-3103-4601

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