Impact of Central Bank Digital Currencies (CBDCs) on Social Welfare: Benefits, Limitations, and Risks
The Impact of Introducing Central Bank Digital Currencies (CBDCs) on Social Welfare
Research on the introduction of Central Bank Digital Currencies (CBDCs) as a new financial tool conducted between 2019-2023 has revealed interesting findings regarding their potential impact on social welfare, especially among young people and individuals with low incomes. While CBDCs have sparked enthusiasm among economists and policymakers, there are concerns regarding their impact on individual financial stability and key economic indicators.
Study: Benefits, Limitations, and Negative Effects of CBDCs
Studies conducted as part of the analysis of CBDC implementation progress indicate that the benefits of this innovation may be limited and could even have negative effects on individual welfare. Countries with higher incomes have been more inclined to experiment with CBDCs, which may be related to their higher level of economic development.
Gallup data confirms a negative correlation between the introduction of CBDCs and social welfare, especially among young people with low incomes. Individuals in this group often face difficulties in using Central Bank Digital Currencies, which can lead to limitations in their development opportunities.
Risks Associated with CBDCs and the Necessity of Regulation
It is important for both the design and regulation of CBDCs to be conducted in a way that minimizes risks associated with potential financial instability, privacy breaches, or concentration of financial power. Introducing hybrid models of CBDCs that allow the private sector to maintain interactions with customers, while being supervised by the central bank, may be a solution to minimize these risks.
Conclusions and the Future of CBDCs
Further research on the impact of CBDC architecture on economic and social outcomes is necessary to accurately assess the effects of introducing these new forms of payment and value storage. Despite some concerns and limitations, the potential of Central Bank Digital Currencies remains undeniable, posing a challenge for researchers, decision-makers, and society as a whole.
