Digital currency development and the impact of central bank digital currency on international and national settlement systems : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Manawatu Campus, New Zealand
Loading...
Date
2025
DOI
Open Access Location
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Massey University
Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author.
Copyright is owned by the Author of the thesis. Permission is given for a copy to be downloaded by an individual for the purpose of research and private study only. The thesis may not be reproduced elsewhere without the permission of the Author.
Rights
© The Author
Abstract
This thesis consists of three essays on digital currency, with a particular focus on central bank digital currencies (CBDCs). These essays progressively narrow in focus, starting with a broad overview of digital currency research, then moving to an empirical investigation of global CBDC practices, and finally, narrowing the scope to explore an in-depth case study of China's CBDC and its global implications.
Essay one provides a comprehensive review of the evolution of digital currency, focusing on two primary categories: private sector digital currencies, represented by Bitcoin and Ethereum, and central bank digital currencies. This literature survey suggests that the future viability of private digital currencies is increasingly constrained by regulatory hurdles, market volatility, and their inadequacies as stable stores of value and mediums of exchange. Meanwhile, CBDCs are emerging as a predominant trend in the digital currency landscape, exhibiting broader application potential. By investigating the potential benefits and challenges associated with CBDCs, this study suggests that there is a critical need for global consensus and cooperation in the development and framework construction of digital currencies.
Essay two assesses the potential influence of CBDCs development on currency’s invoicing capability in international trade. Based on the theories of firms' profit maximization, trade elasticity and sticky prices, this study constructs a model of currency invoicing power, including CBDC announcement year as the shock for moderating effect. Utilizing a sample of the top 50 countries, covering the period from 2005 to 2022, this study finds that the development signal of a country’s CBDC significantly strengthens the exchange rate pass-through, suggesting an enhanced II currency invoicing power, and this effect is even stronger in countries that have piloted CBDC programs. Mechanism analyses reveal that the currency invoicing power improved through reducing exchange rate volatility and increasing currency liquidity in international foreign exchange market. These effects make the currency a more attractive choice for international invoicing. Our research may provide insights for policymakers that promoting and accelerating the development of CBDCs can promote the use of national currencies in international trade, as well as improving national currency internationalization.
Essay three examines the conditions and impediments for the implementation the digital Chinese currency (called e-CNY) in China, where a rapidly evolving digital payment landscape coexists with traditional currency transactions. Utilizing provinciallevel panel data from 2011 to 2021, this study analyzes the potential impacts of "Breadth of Digitization Coverage" and "Digitization Level" on the supply and demand dynamics of e-CNY within the framework of digitalization development. The findings reveal that an increase in digitization correlates with a reduction in the supply and demand for physical currency, indicating that digitalization has paved the way for adopting e-CNY. Further analyses reveal that the penetration of smartphones and the growth of e-commerce have been instrumental in broadening digitalization coverage and the level of digitization. The study foresees that despite the digitalization of wallets and payment scenarios has laid a solid foundation for implementing the e-CNY, establishing an efficient and secure e-CNY payment ecosystem will still require a development period of several years.
Description
Keywords
digital currency, cryptocurrency, central bank digital currency, e-CNY, exchange rate pass-through