Kiffmeister’s #Fintech Daily Digest (20231119)*

CBDC and privacy: A randomized survey experiment

A Bank for International Settlements (BIS) study found privacy-preserving variations of central bank digital currency (CBDC) design have significant effects on willingness to use CBDC to purchase privacy-sensitive products (e.g., psychiatric services and adult products). It was based on a survey of a nationally representative sample of over 3,500 Korean participants. The willingness to use CBDC substantially increases with the provision of information about the privacy benefits of using it. Finally, these effects vary with respondents’ trust in public or private institutions with regard to privacy protection and their demographic characteristics. [Read more at the BIS]

The BIS paper does, however, express some caution about generalizing its findings over time and across countries with different institutional settings and political climates. For instance, with regard to which institution is to safeguard personal data, trust in institutions varies with countries. According to a [2020] US survey, American consumers have more trust in traditional financial institutions than government agencies and Bigtech companies, whereas the respondents in Korean survey show more trust in the government than financial institutions and Bigtech companies. [Read more about the US 2020 survey at the BIS]

Meeting the need for higher privacy in CBDC transactions

The current draft of the digital euro legislation calls for increased privacy for close-proximity offline payments, which is seen as consistent with the European Union AML/CFT framework risk-based approach. The European Data Protection Board (EDPB) and European Data Protection Supervisor (EDPS) suggest increased privacy for low-value online payments too, but not as private as offline transactions, because online transactions would not be limited to proximity payments, resulting in a potentially attractive model for criminals. Hence, they recommend transaction size limits above which complete checks can occur that are lower for online than offline transactions. However, Atakan Kavuklu suggests equalizing the limits at the higher level for all low-value proximity payments (e.g., those using NFC and Bluetooth connections). He believes this could benefit the acceptance and success of a digital euro. [Read more on LinkedIn]

CBDC and bank disintermediation in a portfolio choice model

The IMF published a paper that develops a model to determine the conditions in which the introduction of an interest-bearing CBDC would lead to lower deposits and lending in the banking sector. It finds that richer households increase their holdings of deposits as banks increase deposit interest rates in reaction to the CBDC introduction, which is offset by poorer households switching from deposits to the CBDC. Total deposits are more likely to fall when the mass of poorer households is large and when it is relatively costly to access bank accounts, which tends to be the case in emerging market and developing economy countries. However, even then the impact on lending is quantitatively small if banks have access to other forms of funding, such as wholesale or central bank financing. [Read more at the IMF]

CBDCs: A lesson in the power to disobey

R3’s Jack Fletcher does a nice dismantling of the dystopian case against central bank digital currency (CBDC). First he points out that there are technical solutions to privacy available through distributed ledger technology (DLT) infrastructure that far surpass anything that is available in existing digital solutions, so a CBDC could be as private as cash. Secondly, in a world of payment options, why would anyone use a surveillance CBDC when they could simply use Visa or Mastercard or cash instead? And access to cash is something that no government or central bank is keen to remove. Indeed, they must now step in as consumer preferences drive it to redundancy. But with cash use declining as a global trend, Jack does acknowledge that society must consider a future world whereby it no longer exists and our privacy and our freedom to disobey is removed with it. [Read more on the Tabb Forum]

Mobile money, perception about cash, and financial inclusion

The IMF published a paper that explores survey data for Uganda to compare mobile money users and non-users across a range of indicators that capture individuals’ perceptions about cash, and the extent to which they remit, save, and borrow money. It finds that mobile money users, compared to non-users, are more likely to perceive cash as risky and less likely to prefer carrying large amounts of cash. It also confirms that mobile money users are more likely to receive and send remittances, save, and borrow. They also save and borrow larger amounts. This suggests that the rapid expansion of fintech in Africa is likely to reduce the demand for and usage of cash. [Read more at the IMF]

Is Fintech eating the banks’ lunches?

The IMF published a paper that examines how the growing presence of Fintech firms affects the performance of traditional financial institutions. The findings point to a negative impact on profitability, primarily due to a reduction in interest income and a rise in operational costs. Although established financial institutions have tried to diversify their revenue streams, these efforts have proven inadequate to offset the losses associated with increased competition from Fintech firms. The study also reveals that various Fintech business models, such as peer-to-peer (P2P) lending and balance sheet lending, have varying effects on financial institutions. Cooperative banks experience more significant profit deterioration under both models, whereas (larger) commercial banks appear to benefit from partnerships with P2P platforms, as evidenced by an increase in non-interest income. Furthermore, the findings suggest that Fintech presence has a disproportionately larger adverse effect on banks in countries with more competitive, profitable, and developed financial systems. Interestingly, however, traditional financial institutions in countries with stronger regulatory frameworks appear to benefit from the expanding influence of Fintech firms. [Read more at the IMF]

FYI here are some of my upcoming speaking engagements:

– Currency Research Americas Cash Cycle & Payments Seminar (Orlando Florida on November 27-30)[Register here]

– Digital Euro Conference 2024 (Frankfurt on February 29)[Register here]

*For those interested in intra-day updates, check out my searchable Diigo Fintech developments database, which is also a good place to go to query for past developments:

Kiffmeister’s central bank digital currency monthly monitor

Just a reminder that I produce a monthly digest of central bank digital currency (CBDC) developments exclusively for the official sector. So (only) if you work at a central bank, ministry of finance or international financial institution (e.g., the BIS, IMF, OECD, World Bank) and who would like to receive it by email on the first business day of every month, please DM me on LinkedIn or email me at

The Sovereign Official Digital Association (SODA) is a technology-agnostic firm offering advisory services at the intersection of central banking, digital finance and the web3 industry, aiming to make public digital money a reality. SODA believes institutions in the existing financial ecosystem should have access to the tools and resources they need to move from discussion to action. SODA offers ‘real life’ use cases to help test digital money and drive adoption as central banks and other public institutions explore the future of a more financially inclusive world powered by interoperable blockchain-based networks. SODA would love you to join us on this journey – please get in touch (

Satoshi Capital Advisors is a New York-based, global advisory firm that works with central banks, governments, and the private sector to architect, implement, and operate varying initiatives. Satoshi Capital Advisors’ central bank work revolves around CBDC architecture and implementation, providing advisory services from research phase through to growth phase. Utilizing a product-market fit and technology agnostic approach to CBDC architecture and implementation enables Satoshi Capital Advisors to build tailored solutions, bespoke to local financial system nuances. Satoshi Capital Advisors welcomes requests from central bank officials for virtual and in-person CBDC workshops. [Click here for more information]

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