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ECB – Ensuring Adoption of CBDCs✭

October 13, 2022

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Central banks have been discussing the introduction of a retail central bank digital
currency (rCBDC) for some time. However, potential obstacles to its adoption by
consumers and retailers remain largely unexplored in the academic and policy
literature. This paper surveys the key elements involved in the adoption of any new
means of payment and discusses failed and ongoing initiatives with public digital
money. It concludes that ensuring the desired level of adoption of rCBDCs may
impose significant constraints on central bank design choices and policy goals. In
fact, in some settings, central banks may find themselves on the horns of a dilemma
in seeking to balance the needs to (i) preserve the central bank’s hierarchy of policy
goals, (ii) increase the chances of adoption and use of rCBDCs by consumers and
retailers, and (iii) avoid any adverse economic effects.
Keywords: central bank digital currency, means of payment, demand for money.
JEL codes: E42, E58, D12.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Abstract

Non-technical summary
In recent years, central banks and academics have been investigating the possible
issuance a new form of digital money called central bank digital currency (CBDC).
Like cash, which is also issued by central banks, a retail CBDC (rCBDC) would be
used by consumers and merchants to make everyday transactions. Much of policy
and academic discussion revolves around the policy goals behind any eventual
issuance of this payment instrument. For example, there is broad consensus among
central banks that an rCBDC could achieve improvements in the payments market.
However, issuing an rCBDC might also have undesirable side effects for the
economy; these are also being carefully investigated.
As happens with any other new means of payment, rCBDCs will likely face
challenges in entering the market and being adopted by consumers and merchants.
This paper shows that this important aspect has so far attracted scant attention in
public debate by central bankers and academics; its findings provide a basis for
addressing this aspect through more systematic discussion. It explores the design
elements that, according to the relevant academic literature, need to be present to
increase the likelihood of adoption. The paper also identifies potential obstacles to
adoption and suggests strategies to overcome them. Finally, it extracts lessons from
two failed initiatives with digital payment instruments issued by central banks (the
Finnish “Avant” and the Ecuadorian “Dinero Electrónico”) and from a selection of
ongoing CBDC initiatives.
The paper concludes that further investigation is needed to determine the essential
features that must be in place for the successful adoption of CBDCs. We argue that
central banks might, in some instances, be faced with difficult choice in seeking to
balance the following three aspects: (i) keeping the current order of priority for policy
goals, (ii) opting for designs and strategies that could increase the likelihood of
adoption, and (iii) using designs that avoid negative economic effects.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Non-technical summary

Introduction
The issuance of a retail central bank digital currency (rCBDC), a new form of
central bank money to be used in retail payments, has been widely discussed
in recent years. Ninety percent of central banks worldwide are currently engaged in
digital currency work, ranging from research only to actual roll-outs (see Kosse and
Mattei, 2022). As regards the reasons for issuing an rCBDC, various surveys and
academic research point to common themes, such as improving payments markets,
financial stability, monetary policy and financial inclusion (Kosse and Mattei, 2022).
Although the relative importance of each motive for rCBDC issuance varies
across central banks, a precondition for attaining the stated policy goals is the
achievement of a minimum level of adoption and acceptance of this new
means of payment by consumers and retailers. For instance, adapting central
bank money to increasingly digitalised payments markets, a goal shared by most
central banks, might only be achieved if consumers were to adopt rCBDCs in their
daily payments. Similarly, using rCBDCs to supplement the monetary policy toolbox
might require the existence of non-negligible demand for such a currency. Most of
the ongoing research efforts by central banks and academics have focused on the
possible design features, goals and economic implications of an rCBDC. However,
despite these efforts, the questions of how exactly central banks would achieve the
desired level of adoption, and how they would overcome potential obstacles to doing
so, largely remain to be discussed. Any new means of payment would have to be
aligned with consumer expectations and provide the public with added value in terms
of universe of available payment options, in a highly competitive market which has
been evolving rapidly in recent years.
This paper suggests that, when including considerations on the adoption and
use of rCBDCs in their broader investigation of the topic, central banks may be
facing a design choice problem that is more complex than generally assumed
in policy reports and research literature. Put simply, this design choice problem is
as follows: how to maximise the number of desired policy goals effectively
implemented, subject to constraints1 such as (i) sufficient adoption by and demand
from consumers and merchants to fulfil the desired policy goals and (ii) the so-called
“do no harm” principle, or avoiding negative economic implications. But in cases
where adoption-related considerations conflict with certain policy goals, central
banks might even be find themselves in the horns of a dilemma requiring them to
decide between: (i) preserving the hierarchy of policy goals, (ii) ensuring widespread
adoption of the rCBDC, and (iii) preventing adverse economic effects.
This paper is an initial attempt to systematically cover the aspects central
banks need to consider in trying to achieve their desired level of adoption and
use. At present, empirical literature exploring the factors behind, and obstacles to,
1

Arguably, there are also other constraints related to technical feasibility (see, for example, Deutsche
Bundesbank, 2021) and legal imperatives in some jurisdictions (e.g. regulations on money laundering
and countering the financing of terrorism) which are not analysed in this paper.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Introduction

the potential adoption of rCBDCs is scant, but is growing in scope and extent.
However, it generally focuses on a given aspect of adoption or on a certain
geographical region. Our paper aims to systematically explore several aspects of
rCBDC adoption by surveying the literature available, in particular with respect to the
conditions necessary for adoption and the main obstacles encountered by previous
failed rCBDC initiatives. To this end, the following topics are addressed: (i) central
banks’ stated main goals for rCBDC and the design requirements to achieve these
goals (Section 2); (ii) the key elements of the adoption of new means of payment,
including the models for the diffusion of new payment technologies, as well as the
observed preferences and behaviour of consumers and retailers (Section 3); and (iii)
a discussion of lessons learnt in terms of potential obstacles to adoption that can be
extracted from past and ongoing rCBDC initiatives (Section 4). Finally, Section 5
provides the conclusions.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Introduction

Current discussion of rCBDCs: an
overview
The majority of central banks are exploring the idea of issuing a digital
currency usable in retail payments, also known as an rCBDC. According to a
recent survey covering 81 central banks, which represent 94% of global economic
output (Kosse and Mattei, 2022), 90% of central banks surveyed were actively
engaged in some form of work relating to rCBDCs. Current discussions mainly
revolve around central banks’ reasons for issuing an rCBDC – that is to say, how
rCBDCs can contribute to achieving central banks’ goals – and around the design
features that would be needed to fulfil central bank objectives. In addition, the
growing academic literature on rCBDCs has been analysing the economic impact of
different design choices (see, for example, Auer et al., 2022).
Academic and policy debate mainly focuses on policy-related reasons for
issuing rCBDCs and on analysing their economic implications; less attention
has been given to the design choices that would ensure their wide adoption.
Section 2.1 provides an overview of central banks’ main policy goals as regards
rCBDCs, as well as the design requirements that rCBDCs would have to exhibit to
fulfil them.

2.1

Central banks’ main goals and motives for issuing
rCBDCs
With regard to the introduction of an rCBDC, most central banks’ strategic
goals relate to enhancing performance in four main areas: (i) payments
markets, (ii) financial stability, (iii) monetary policy, and (iv) financial
inclusion 2. For each of these four main areas, different design options are being
considered with a view to formulating clearly specified policy objectives. Each central
bank’s hierarchy of policy goals – that is to say the relative importance of the policy
goals – depends on its individual strategies and its local country or currency-related
circumstances. The relative importance of these goals has varied over time (Kosse
and Mattei, 2022). Also, central banks’ motives in advanced economies differ from
those in emerging markets and developing economies. In this regard, in advanced
economies, improvements in payment markets (such as enhanced payment safety)
are found to be a major driver for introducing an rCBDC. Conversely, the average
importance of monetary policy as a motive has decreased over time in those same

See Barontini and Holden, 2019; Boar et al., 2020; Boar and Wehrli, 2021; Kosse and Mattei, 2022,
and the reports published by Bank of Canada et al., 2020; European Central Bank, 2020a; Bank of
England, 2020; Bank of Canada et al., 2021a; Board of Governors of the Federal Reserve System,
2022. Some policy objectives may not be strictly related to these four themes (e.g. facilitating fiscal
transfers, preserving seigniorage income, or contributing to central banks’ reputational management).
However, the themes broadly cover most policy proposals and motives for the introduction of rCBDCs.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

economies (Kosse and Mattei, 2022). In emerging economies, however, central
banks generally attach more importance to financial inclusion.
1.

Improvements in the functioning of payments markets. Recent surveys of
central banks (Boar and Wehrli, 2021; Kosse and Mattei, 2022) find that
rCBDCs may facilitate certain improvements in the functioning of payments
markets, including:
(a) Payment safety and robustness: according to the Bank of Canada
(2020), digital banknotes would allow households and businesses
accessing risk-free money through central banks and improve operational
resilience through, for example, offline capabilities.
(b) Domestic payment efficiency: some authors consider that rCBDCs could
improve domestic payment efficiency by increasing competition and
fostering innovation in payments markets (Ponce, 2020; Usher et al.,
2021). 3
(c)

Payment efficiency in cross-border environments: fragmentation in
payment systems currently generates frictions in cross-border payments,
which are therefore often costly and slow and lack wide accessibility,
adequate traceability and transparency (Auer et al., 2022). A survey of
central banks shows that a quarter of them are thinking of introducing a
CBDC with interoperable features to reduce these frictions (Auer et al.,
2021).

(d) Other payment-related considerations: for example, the decreasing use
of cash (Bank of Canada et al., 2020; European Central Bank, 2020a;
Bank of England, 2020; Board of Governors of the Federal Reserve
System, 2022) or the economic consequences of potential widespread
adoption of private digital currencies.
2.

Financial stability. Central banks see financial stability as one of the main
reasons for issuing rCBDCs (Kosse and Mattei, 2022). 4 The following key
topics in this regard were found in the literature examined.
(a) Positive impact of rCBDCs on financial stability: the research suggests
that a digital, risk-free, and government-issued instrument might improve
the stability of the financial system (Auer et al., 2022). Some authors
suggest that the introduction of an rCBDC could reduce fragility in the
financial system by sounding an alert where there is a risk of bank runs
(Keister and Monnet, 2022) or reducing the impact of any such runs
(Williamson 2022), thus protecting deposits against forced liquidation
(Fernández-Villaverde et al., 2021), easing liquidity pressures (Mancini-

More generally, researchers also suggest that introducing an rCBDC could bring efficiency gains,
depending on the structure of the banking sector (Chiu et al., 2019; Keister and Sanches, 2021;
Andolfatto, 2021), or could modify the banking structure itself (Garratt and Zhu, 2021).

Over time, this motive has become more important in the central banks of emerging and developing
economies, according to Boar and Wehrli, 2021.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

Griffoli et al., 2018) or reducing liquidity and solvency risks (Stevens et al.,
2017).
(b) Adverse impact of rCBDCs on financial stability: a much-discussed
issue is the potential adverse impact on financial stability if an rCBDC had
certain design features (e.g. similarity with bank deposits and positive
remuneration) (Bank of Canada et al., 2020). Engert and Fung (2017)
assert that the main advantage of rCBDCs over bank deposits is their riskfree nature. If interest-bearing status were to be granted, depositors might
find rCBDCs more attractive, which could lead to disintermediation and
faster bank runs (Committee on Payments and Market Infrastructures and
Markets Committee, 2018). In contrast, other authors argue that rCBDCs
would be unlikely to change the triggers for bank runs as much as
originally argued (Auer et al., 2022).5
(c)

Modulation of the effects on financial stability depending on design
choice: central banks would decide the impact of an rCBDC by selecting
the design features it exhibits. Some authors suggest possible responses
or design choices (for example, limited convertibility or position limits) to
avoid adverse consequences (Mancini-Griffoli et al., 2018; Kumhof and
Noone, 2018; Bindseil, 2020).

Monetary Policy. The reasons cited by central banks for issuing an rCBDC
include the possibility of equipping themselves with new monetary policy tools.
Most policy makers and academics consider that central banks could indeed
create an additional monetary policy instrument, for example, by introducing a
yield-bearing rCBDC. Among other things, an rCBDC could help in relaxing the
zero lower bound constraint (Bordo and Levin, 2017), strengthen the
transmission of monetary policy through its direct implementation
(Davoodalhosseini, 2021), or improve the allocation of transfers
(Davoodalhosseini, 2021). However, discussions of rCBDCs and monetary
policy are still at an early stage. Questions remain about the existence and
extent of the positive and negative effects for monetary policy objectives of
establishing an rCBDC (see, for example, Davoodalhosseini, 2021; Pfister,
2020; Meaning et al., 2018; García et al., 2020; Jiang and Zhu, 2021). In
general, central banks have not reached any major decisions on the use of
rCBDCs to enhance monetary policy (for example, to the best of our knowledge
no trials launching remunerated rCBDCs have been conducted).

Financial inclusion. Some central banks aim to use rCBDCs to ensure
continued access to electronic payments and central bank money (Kosse and
Mattei, 2022). In developing economies, structural deficiencies often reduce
access to formal financial services (transactions, payments, savings, credit and
insurance). In advanced economies, where access to electronic media is more
widespread, the increase in digitalisation can lead to a digital divide between
sectors of the population (Bank of Canada et al., 2020). Central banks aim to

The above description of the effects of rCBDCs on financial stability is not exhaustive. For further
theoretical work on this matter (see Brunnermeier and Niepelt, 2019; Skeie, 2020; Schilling et al., 2020;
Niepelt, 2020; Fernández-Villaverde et al., 2021; Williamson, 2021 and Williamson, 2022).

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

provide universal access to a simple, reliable, risk-free and flexible electronic
means of payment, especially if its design features replicate or outperform
certain cash-like features (Committee on Payments and Market Infrastructures
and World Bank Group, 2020). In this regard, in countries where cash use is
declining and cash has become increasingly marginalised (for example,
Sweden), central banks argue that rCBDCs could serve as a means for the
general public to access central bank money (Sveriges Riksbank, 2020b).
However, the effectiveness of the use of rCBDCs for financial inclusion
objectives would vary depending on the local causes of exclusion (Bank of
Canada et al., 2020) and other solutions might be more efficient, for example
access-to-cash policies where cash is difficult to obtain and use (Mancini-Griffoli
et al., 2018; Zamora-Pérez, 2022).
The design features of any rCBDCs and their implementation will partly
depend on the motives set out above. However, the research points to the
sometimes-difficult interaction and potential trade-offs between achieving a
given goal and the potentially adverse economic impact of the features
themselves. Table 1 provides a non-exhaustive list of correspondences between
policy goals and the design features that rCBDCs should aim for and exhibit, as
reported in selected surveys and reports. As the table shows, design requirements
come with different degrees of specificity, ranging from very vague adjectives
describing their design objectives (such as “efficient” or “competitive”) to concrete
design features or functionalities (such as “remuneration” or “offline functionalities”).
An important aspect not shown in Table 1 is the interaction between some of the
goals and design requirements, which are sometimes subject to trade-offs as
discussed above. For example, the adverse impact of a possible set of rCBDC
features (for example, remuneration to facilitate monetary policy objectives) may give
rise to new requirements (for example, holding limits to avoid bank
disintermediation). Moreover, some of the technologically feasible design
alternatives might exhibit a given feature (for example, anonymity or a high level of
privacy) but the rCBDC itself would need to adhere to money laundering and
terrorism financing requirements. In certain jurisdictions this would therefore exclude
certain of the available options from the set of possible design choices. In this
regard, the Bank of International Settlements, together with a group of central banks
in advanced economies, have identified three foundational principles that should be
observed in deciding the design of rCBDCs (Bank of Canada et al., 2020). Two of
these principles are the necessity to “do no harm” and the need to achieve stable
coexistence with private money (for example, commercial bank accounts) and other
forms of central bank monies (for example, cash).

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

Table 1
Central banks’ main policy motives for issuing rCBDCs and the design requirements
for rCBDCs to partly fulfil each motive
MAIN POLICY MOTIVES

DESIGN REQUIREMENTS

(i) Payments markets
Improve payment safety and robustness

Digital, innovative, competitive, robust/resilient, safe, cyber-resilient,
offline capabilities, back-up system, user access requirements

Improve domestic payments efficiency

Competitive, convenient, low-cost, fast, flexible/adaptable

Improve cross-border payments efficiency

Competitive, low-cost, allowing international use, ease of access for
tourists, geolocation possibilities, geo-limits, user access
requirements

Prevent any negative consequences of the adoption of
digital private currencies

Competitive features, low cost

(ii) Financial stability
Strengthen financial stability

Risk-free, digital (e.g. improving information available to central banks
on potential bank runs)

Avoid financial instability

Limits to holding rCBDC, limits to convertibility

(iii) Monetary policy
Use of rCBDC as a monetary policy tool (e.g. interest rate
channel)

Remuneration, universal access for the public

(iv) Financial inclusion
Increase access to digital payments and central bank
money

Universal access, physical support, ease of use, no need for a bank
account, low cost for end users

Sources: Barontini and Holden (2019), Boar et al. (2020), Kosse and Mattei (2022), Bank of Canada et al. (2020), European Central
Bank (2020a), Bank of England (2020), Board of Governors of the Federal Reserve System (2022).

A less explored constraint to achieving policy goals is the intended degree of
adoption of each rCBDC, which would partly determine its design features.
Most studies assume that rCBDCs will attract sufficient demand to ensure that
central banks’ policy goals are achievable. It has been argued that a real risk exists
of some rCBDC implementations actually failing as a result of their own success
(that is to say that rCBDCs could become so attractive to consumers that they could
significantly displace the private sector, especially if they take the form of accounts
similar to, but less risky than, accounts with commercial banks). However, the most
popular uses for rCBDCs would seem to be as a new means of physical payment
(for example, point-of-sale (POS) and person-to-person transactions) or remote
payment (for example, for online commerce or recurrent payments, such as bill
payments). In the case of retail payments, central banks and rCBDCs would be
targeting market shares already occupied by existing products. Hence, they would
need to address the question of whether the design requirements to achieve their
policy goals (as exemplified in Table 1) also fulfil the conditions for a new means of
payment to be adopted and could attain the desired market share in the payments
market. These considerations seem to be in line with a recent report by a group of
advanced economy central banks led by the Bank of International Settlements. The
report discusses initial guidelines for potential adoption, but shows that discussions
are at a very early stage (Bank of Canada et al., 2021b). Some authors who are
aware of the importance of adoption have argued that rCBDCs should be widely
adopted and accepted but with steps being taken to ensure that they do not become
so widespread that they crowd out private solutions (Bindseil et al., 2021;
Brunnermeier and Landau, 2022; Ahnert et al., 2022). In any case, a consensus

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

seems to be growing among central banks in some regions that the focus must be
on users’ needs and that a certain level of adoption needs to be achieved (Panetta,
2022; Balz, 2022). In the following section we survey the main trends in retail
payment markets, as well as the conditions that must be fulfilled to ensure the
widespread adoption and use of any new means of payment.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Current discussion of rCBDCs: an overview

What do consumers want from a new
means of payment? Major trends in
retail payments markets, and choice
and adoption determinants
As seen in the previous section, ongoing discussions of rCBDCs by central
banks and academics are not, for the most part, focused on their widespread
adoption as a means of payment. In general, widespread adoption is either not
mentioned at all, being taken as a given, or, in the few cases where the importance
of adoption for the success of an rCBDC is mentioned, not thoroughly analysed. An
early example of the latter is given in Mancini-Griffoli et al. (2018), which looks at the
criteria applied by users in judging different forms of money. They argue that users
need a form of money that can maximise private benefits (for example, by facilitating
payments on demand of any size and with no limits or acceptance restrictions) and
minimise the associated costs (for example, by applying lower fees). Auer and
Böhme (2020) remark that rCBDC design would have to match consumers’ needs
but do not describe these needs in detail. Examples provided by the authors include
universal accessibility and ease of use, together with assured transaction privacy.
Bindseil et al. (2021) suggest that the three key factors contributing to the success of
an rCBDC are: (i) merchants’ acceptance, (ii) the support of intermediaries in
distribution of the rCBDC, and (iii) an attractive value proposition for individuals and
merchants. Recently, Bank of Canada et al. (2021b) outlined several considerations
of importance to the adoption of rCBDCs, but the discussions are at a preliminary
stage. Khiaonarong and Humphrey (2022) argue that, to ensure wide adoption and
use, central banks will likely design rCBDCs by replicating some of the benefits of
existing cash substitutes (for example, convenience, transaction speed, fraud
control, etc.) and by including additional benefits, such as lower transaction fees.
Only a small, albeit growing, number of empirical papers have analysed the
factors that facilitate adoption, but vary in terms of the methodology adopted
and the local nature of the data used. Using Canadian survey data, Huynh et al.
(2020) suggest that central banks could increase customer acceptance by
developing designs exhibiting features that were relevant for payment choice. The
factors that they found to be vital to adoption success were (in order of importance)
transaction costs, followed by consumers’ expectations in terms of ease of use,
availability, and security. Li (2021) predicts household demand for rCBDCs. By
modelling rCBDCs and close substitutes, as product bundles of different attributes,
using Canadian survey data, the author shows that demand for rCBDCs could vary
considerably depending on different design attributes, such as budgeting usefulness,
the degree of anonymity, the rate of return and the bundling of bank services. Using
a panel of Dutch consumers, Bijlsma et al. (2021) found that consumers perceive
rCBDCs as distinct from current and savings accounts already offered by
commercial banks. The higher the trust in banks in general, the greater the

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
What do consumers want from a new means of payment? Major trends in retail payments
markets, and choice and adoption determinants

willingness to adopt an rCBDC. The need for privacy and protection was also found
to be significant. The study’s results further suggested that a successful rCBDC
design should include interest rates on rCBDCs, given that consumer adoption was
found to be dependent on price incentives. A survey run by Deutsche Bundesbank
(2021) used a representative survey and conducted qualitative research interviews
of German consumers to investigate users’ perceptions of a digital euro (that is to
say, the Eurosystem’s CBDC project6). The results showed that consumers would
like a free-of-charge rCBDC that ensures a high degree of privacy. The survey also
found that cash payers tended to have a more negative attitude towards a digital
euro, but that people who had heard of the digital euro and those who were more
familiar with digital payments tended to have a more favourable view of the issuance
of an rCBDC. More recently, Kantar Public (2022) presents the results of a
qualitative survey of individuals and merchants in the euro area. The study provides
a comprehensive qualitative analysis of the attributes of any new means of payment
that euro area consumers and merchants would value. The respondents were also
asked about their knowledge and understanding of the digital euro, as well as their
perceptions of its backing by central banks.
Research efforts to extend the empirical literature referred to above are of
paramount importance, but more comprehensive investigation of local retail
payments markets and exploration of the other strands of literature are equally
important to attain the desired level of rCBDC adoption. The literature discussed
above provides valuable insights into several dimensions of rCBDC adoption, but
other dimensions should also be considered in judging possible rCBDC designs.
Works basing their conclusions with respect to rCBDCs on consumer preferences for
existing means of payment fail to address a considerable number of adoption
obstacles in the early stages of new means of payment (see, for example, the failed
means of payment cases discussed in Jiang (2020) or, for an rCBDC example, Grym
(2020)). Similarly, surveys on early perceptions of rCBDCs may have low predictive
value in terms of consumer behaviour. As the research shows, for well-established
means of payment that consumers know well (such as cards and cash), self-reported
preferences diverge from actual use (European Central Bank, 2020b; van der
Cruijsen et al., 2017). Arguably, the gap between stated preferences and actual
behaviour may be wider for a means of payment that is still at the discussion phase
and whose final features are, necessarily, not known to consumers. Finally, as
payment choice preferences and behaviour may vary significantly between countries
(Bagnall et al., 2016), data specific to any given country might not be valid for others.
A systematic discussion of the key factors for potential rCBDC adoption is
therefore absent from the academic and policy literature. If we consider the
limited available data in most jurisdictions as well as the uncertainty about the design
alternatives, it is difficult to forecast the likely levels of adoption. 7 However, it is
6

The results of a public consultation on the digital euro project were published in European Central
Bank, 2021, signalling the Eurosystem’s intention to focus on consumers’ needs. Although participation
was voluntary and the results were not therefore representative, participants reported that privacy,
security, usability throughout the euro area, the absence of additional costs and offline usability would
be the most important features for a digital euro.

Adalid et al. (2022) discuss the different approaches to estimating the potential demand for CBDCs, but
assert that these approaches are sensitive to key design choices.

important to identify the main determinants for the adoption of rCBDCs across
jurisdictions. This section provides a discussion, organised around four aspects: (i)
identifying the most notable trends in the retail payments markets to assess their
competitiveness and innovation capacity, (ii) identifying research that explains the
factors facilitating (or hindering) the diffusion of new mobile technologies and their
application to retail payment markets, (iii) outlining the attributes identified in the
literature as affecting payment method decisions, and (iv) describing the importance
of the two-sided nature of the retail payments market.

3.1

Major trends in the retail payments market
The global retail payments market has been characterised in recent years by
intense innovation and changing consumer habits, followed by gradual but
steady changes in the use of payment instruments and the choice of payment
channels. The most notable recent trends – now strongly accelerated by the
COVID-19 pandemic – are as follows: i) the shift from in-store shopping to ecommerce, ii) the increasing adoption of contactless payments and digital wallets, iii)
the displacement of cash transactions, and iv) the rapid rise, in some regions, of
instant payments (Boston Consulting Group, 2020; McKinsey & Company, 2020;
Boston Consulting Group, 2021; Capgemini, 2022). Other methods are also being
increasingly used, such as quick response (QR) code-based mobile payments and
invisible payments8. It is estimated that next-gen payments will be the major driver of
the new payments mix; according to some forecasts, instant payments and e-money
payments will account for over 25% of cashless transactions by 2025 (Capgemini,
2022). A likely scenario in a more distant future is that stablecoins will have a
significant impact on the global retail payments market (ECB Crypto-Assets Task
Force, 2020).
These changes are the result of technological and business innovations in a
context of fierce and increasing competition. Technological innovations are
taking place in several dimensions of the retail payments markets. Innovations in
front-end devices (for example, cards and smartcards, smartphones, wearables),
initiation channels (for example, remote payments or proximity channels, such as
near field communication (NFC) or QR code scanning), and back-end payment
infrastructures (for example, the development of application programming interfaces
(APIs), distributed ledger technology, applications of artificial intelligence and
machine learning, the internet of things) all have an impact in the evolving landscape
(European Central Bank, 2019). At the same time, new types of competitors are
developing applications using these innovations, together with new business models.
Newcomer banks and non-traditional (bigtech and fintech) players are progressively
crowding the market and challenging incumbent banks and payment service
providers, forcing the latter to accelerate the pace of innovation (Boston Consulting

An example of an invisible payment is where consumers pay for the services of ride-hailing companies
(such as Uber), with the transaction being charged to them without further interaction.

Group, 2020; Capgemini Research Institute, 2020; Boston Consulting Group, 20219).
This, in turn, has led to a need for strategic alliances and mergers and acquisitions
between different players. Regulators in some regions have further encouraged
competition and innovation by establishing a framework for open banking 10 that may
lead to more effective collaboration among industry players and contribute to
expansion of the suite of payment methods (Capgemini, 2020).
Amid increasing demand for security and privacy, both governments and the
industry have been detecting and tackling the main vulnerabilities of payment
innovations. As data privacy and security awareness grows, it is becoming
increasingly important for industry players to instil trust in payments. 11 A recent
survey on data privacy found that one in three United States citizens has been
exposed to data compromises, and almost half of consumers report having little to
no control over their data (Sides et al., 2019). Another survey shows that 30% of
banking consumers claim that payment data usage is “an invasion of privacy that
should be prohibited” (A.T. Kearney, 2019). Regulators have therefore been
addressing data privacy and protection issues, together with other payments-related
vulnerabilities such as money laundering and terrorism financing, through digital ID
solutions (Capgemini, 2020; Capgemini, 2022).12 In any event, ensuring complete
consumer trust might be hard to achieve. According to a US-based survey, only 25%
of consumers are very or extremely confident about United States regulations
protecting personal data privacy and security (A.T. Kearney, 2019). Hence the
industry will have to innovate to find better ways to address the trade-off between
increased consumer privacy to generate trust and the use and sharing of consumers’
data for commercial purposes. In this regard, the extent to which cryptocurrencies
and blockchain technology might play an important role in the future by finding a
niche among segments concerned with privacy is as yet unknown.
Alongside the race in the private sector to improve users’ experience, the
share of non-cash payments has increased in recent years. For payment
instrument providers to succeed, securing top-of-wallet status 13 is imperative given
that consumers typically use only a few payment instruments (Bagnall et al., 2016;
McKinsey & Company, 2019; Boston Consulting Group, 2020). To achieve this, they
have adopted a number of strategies to make cashless means of payment more
convenient, simpler, and based on consumers’ profiles. At the same time, survey
evidence suggests that the share of cash payments in major geographical regions
has decreased over recent years, and more markedly during the COVID-19
pandemic (see, for example, Coyle et al., 2021; Tamele et al., 2021). This decline in
9

One survey found that 30% of consumers claimed that they used a bigtech company for payment
services and 50% are using challenger banks for some payments. During the pandemic lockdown
(from April 2020) 38% of consumers discovered new payment providers.

A notable case is the European Union through the revised Payments Service Directive (PSD2).

Or, alternatively, offer some form of compensation in exchange for personal data (A.T. Kearney, 2019;
Martin et al., 2020).

Despite the perceived need for new legal frameworks, some argue that regulation and compliance
might generate increased costs to meet new requirements and that this would drive a shift of resources
away from the development of new solutions (BNY Mellon, 2014). Against this background, the industry
is increasingly outsourcing compliance with data-related regulations to specialist firms (Capgemini,
2020).

That is, ensuring that the payment instrument they offer is the first seen and used by consumers when
they open their wallet.

the transactional use of cash is a result of increased acceptance and use of noncash means of payment (Fung et al., 2012; Huynh et al., 2014; Arango-Arango and
Suárez-Ariza, 2020; Brown et al., 2020).
However, overall demand for cash has not decreased globally. On the contrary,
despite the growing adoption of payment innovations, major currencies have
experienced a continuous growth of cash in circulation (Jobst and Stix, 2017; Bech
et al., 2018; Ashworth and Goodhart, 2021; Zamora-Pérez, 2021). Indeed, the
increase in non-cash payment usage seems to have no or little effect on total
banknote demand (Bech et al., 2018; Brown et al., 2020). This is usually attributed to
increased store-of-value demand as a result of low interest rates, increased
uncertainty and other factors, such as the ageing of the population. For currencies
with a strong international role, a significant share of cash in circulation can also be
explained by demand from abroad (Judson, 2017; Lalouette et al., 2021). Although
this may change in the future, some commentators note that countries with
decreasing cash in circulation in recent years, such as Sweden, might be outliers
rather than front-runners in the much-announced global trend towards a less-cash
society (Armelius et al., 2020).

3.2

Technology adoption: insights from the literature
In designing digital currencies, central banks can tap into the findings of a
wealth of research investigating the factors influencing the adoption of
innovations in competitive markets. The technology acceptance model (TAM),
originally applied to information technology in Davis (1989), is that most widely used
to model how users come to adopt, and subsequently use, a new technology. Of the
many reasons explaining the use of a technology, perceived usefulness and ease of
use are found to be the most important. Perceived usefulness is usually defined as
the degree to which users believe a technology will improve the performance of a
task it aims to support. Perceived ease of use is the degree to which the consumer
feels that using the technology would require little to no effort. Venkatesh and Davis
(2000) extended this model by showing how perceived usefulness depends on social
influence. This implies that influence by other people (subjective norms) or a
perceived gain in social status after usage (image) also affect adoption decisions.
Usefulness, and hence user acceptance, are also influenced by cognitive processes,
such as comparability tests, that eliminate innovations unsuited to performing the job
at hand (job relevance) and perceptions of tangible results from using the innovation
(result demonstrability). The literature has further expanded the TAM to include other
attributes, such as behavioural traits (Venkatesh et al., 2003).
More recently, the TAM and its extensions have been applied to innovations in
mobile technologies (in particular, mobile payments) and e-commerce. Mobile
technologies are two-way pagers, that is to say, wireless telecommunications
devices, such as smartphones and tablets, that receive and display text or voice
messages. Mobile payments involving the exchange of purchase and payment
information through wireless means (such as short message services, NFC, QR
codes, mobile digital wallets, etc.) are among the capabilities of these technologies.
Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
What do consumers want from a new means of payment? Major trends in retail payments
markets, and choice and adoption determinants

The diffusion of these innovations and their adoption by consumers, although now
increasing, got off to a slow start (Chandra et al., 2010; Schierz et al., 2010). The
TAM, in conjunction with the innovation diffusion theory, have been applied to
investigate which factors are behind the slow initial adoption of mobile payments.14
Once again, the factors influencing the behavioural intention to use these
technologies in the early stages of adoption are, generally, perceived ease of use
and perceived usefulness (Kim et al., 2010). Other predictors of adoption are trust
(Gao and Waechter, 2017; Chandra et al., 2010) and factors such as compatibility
with existing behaviours and experiences, the degree to which an individual pursues,
or is capable of pursuing, a mobile lifestyle, and a social environment perceiving
mobile payments as desirable (Schierz et al., 2010; Oliveira et al., 2016). Some
barriers to mobile payment adoption are also identified, such as premium pricing,
complex payment procedures, a lack of widespread merchant acceptance, and
perceived security risks (Mallat, 2007; Arvidsson, 2014). Finally, the adoption of
initiation channel innovations, such as NFC and QR code mobile payments
(Liébana-Cabanillas et al., 2015) or e-commerce (Pavlou, 2003), have also been
studied by using and extending the scope of the TAM.
As with mobile payments, the initial diffusion and adoption of rCBDC
payments might face obstacles, unless these are identified and addressed in
the conception and initial design stages. Davis and Venkatesh (2004) find that
predicting the measure of user acceptance during the very early stages of the design
process is viable through prototype testing. Using the TAM as the theoretical lens,
their experiment-based findings show that perceived ease of use can be predicted by
direct hands-on usage data provided by consumers actually interacting with the
system. However, perceived usefulness can be more simply predicted by giving
users access to information about the system’s functionality, even if they do not have
hands-on experience of its use. Non-interactive prototypes that only outline system
features are therefore sufficient to allow users to form accurate perceptions of the
future usefulness of the system. Prototype testing can be essential in reducing
operational blindness and cutting costs, as less than 25% of the total costs of a new
project would have been incurred by the time that the functionalities are specified.
Thanks to the feedback obtained through testing, if the prototype does not fulfil
users’ needs and the project is dropped, 75% of the total costs can be saved (Davis
and Venkatesh, 2004).

3.3

Payment instrument attributes and other determinants
affecting payment choice
The design of rCBDCs and implementation of their roll-out could also benefit
from research on the determinants affecting payment choice. Once payment
instruments have been adopted and usage reaches a critical mass, decisions by
consumers to use any one instrument (such as cash, cards or another instrument)
are based on multiple determinants. The work undertaken by Huynh et al. (2020)
and Li (2021) that is summarised above provides valuable examples of how to use
14

For factors determining continued issuance (post-adoption), see Zhou (2014).

survey data on preferences for certain attributes of existing means of payment to
extract useful conclusions for rCBDC design. This subsection therefore surveys the
main factors that, according to the literature in different countries, critically affect
payment choice, including payment instrument attributes and circumstantial
determinants. A ranking of these different factors cannot be extracted easily from the
literature, given the different survey designs, consumers’ preferences, which vary
depending on the region analysed, and the research methodologies used.
The literature uses consumer survey data to identify the key attributes of
payment instruments that influence consumers’ decisions to pay with cash,
cards, or other instruments. The attributes most often analysed in this literature
are as follows:
•

Costs are among the most important factors determining payment choice. They
include surcharge fees, penalties, postage and interest (Koulayev et al., 2016).
For example, consumers respond negatively to fees levied on debit card
transactions (Borzekowski et al., 2008).

•

Benefits and rewards, such as “miles” or “points”, are found to have a positive
effect on the use of payment methods (Esselink and Hernández, 2017).
Nonetheless, reducing benefits on credit or debit cards does not seem to
significantly change their usage (Ching and Hayashi, 2010).

•

Ease of use generally refers to the convenience of a payment instrument at the
time of the transaction, that is to say time spent in remembering a PIN, signing
for transactions or making a change in the event of mistake (Arango et al.,
2015b). As with initial adoption, there is evidence that the perceived ease of use
of one payment instrument compared with another is strongly and positively
correlated with the adoption and usage of that payment instrument (Bagnall et
al., 2016).

•

Transaction speed is the length of time between a transaction and
confirmation that it has been successful (Schuh and Stavins, 2016). It has been
found that speed at checkout positively influences payment instrument choice
and adoption by consumers, given that some payment methods require more
time for a transaction to be completed (Arango et al., 2015b).

•

Privacy is linked to a reduced risk of consumers’ personal information being
obtained by third parties without their consent. Lack of privacy of payment
instruments has a negative effect on usage (Schuh and Stavins, 2016).

•

Security is related to the risk of theft or the fear of losing money. Overall, while
security risks have a negative effect on some payment options, their effect on
choice and usage is less than for other attributes (Koulayev et al., 2016).

•

Budgeting usefulness, or features of payment instruments that allow
households to track their expenses and set payment constraints (for example,
establishing a budget), provides utility to consumers and helps them to reduce
overspending (von Kalckreuth et al., 2014; Hernández et al., 2017). Some
payments might be more transparent than others, thus making it easier to

control spending. For example, Esselink and Hernández (2017) show that
consumers’ preference for cash is affected by the need to have a clear overview
of expenses. This characteristic has been found to positively affect payment
choice (Runnemark et al., 2015).
Circumstantial determinants, and not just the concrete features of a payment
instrument, also affect payment choice. These determinants vary widely given
that they may relate to a given situation and the characteristics of a transaction, the
state of development of the retail payments sector, the individual’s payment habits,
or society’s norms. The most notable of these factors are set out below.
•

Transaction size is sometimes expressed as the price of the transaction plus
its square value (Bounie and François, 2008). The consensus in the literature is
that the use of cash decreases as transaction size increases (Bounie and
François, 2008; Bagnall et al., 2016; Wang and Wolman, 2016; Wakamori and
Welte, 2017).

•

Point of sale (POS) location influences the use of different means of payment.
It has been shown that the share of different payment instruments varies
depending on the transaction venue (for example, grocery stores, gas stations,
semi-durable goods outlets, services or entertainment venues) (Bagnall et al.,
2016; European Central Bank, 2020b). For example, whereas the probability of
cash being used in small stores is higher than for bank cards, the probability of
cheques and cards being used is always higher than for cash in other points of
sale (Bounie and François, 2008).

•

Cash-first rule means the increased likelihood of cash being used for
transactions when the amount of cash held is higher (Bagnall et al., 2016;
Arango et al., 2015a; Arango et al., 2015b), that is to say, consumers who carry
more cash have a higher propensity to use it for transactions.

•

Perceived acceptance means people’s perception of whether the merchant
accepts the relevant means of payment, for example whether cards and other
non-cash means of payment are accepted or a cash-only policy applies
(European Central Bank, 2020b). The literature suggests that higher cash
usage is associated with lower levels of perceived card acceptance at the POS
(Bagnall et al., 2016; Wakamori and Welte, 2017). Consumers’ preference for a
payment instrument may, in turn, drive merchant acceptance (Bounie et al.,
2017).

•

Habit stickiness can be defined as a customer’s long-term use of a payment
instrument (von Kalckreuth et al., 2014). Habits explain the choice of payment
instrument and may play a significant role in explaining the discrepancy
between how consumers prefer to pay and how they actually pay (van der
Cruijsen et al., 2017).

•

Social norms can be classified as injunctive norms, that is to say, people’s
perception of what behaviour others expect of them, and descriptive norms, that
is to say perceptions of the behaviour of other people. The stronger a person’s

perception that other people use a payment instrument, the greater the
likelihood that this person will also use that payment instrument (van der
Cruijsen and van der Horst, 2019).

3.4

The two-sided nature of retail payment markets and legal
tender status: implications for adoption
As some retail payment systems are two-sided markets, it is likely that rCBDC
adoption will also depend strongly on merchant acceptance. 15 For instance, a
successful payment card requires both consumer usage and merchant acceptance,
with its value to consumers depending on the number of merchants who accept card
payments, and its value to merchants depending on the number of customers who
use them (McAndrews and Wang, 2012).
Perceived acceptance by merchants is found to play an important role in the
continued use of cash as a payment method. Arango et al. (2015b) show that
introducing rewards on credit cards leads to a decrease in cash usage. However,
after controlling for merchant’s acceptance and for endogeneity, consumers are
found to continue to use cash in many transactions because of its non-pecuniary
benefits, such as ease of use, speed of transacting, and anonymity. This last factor
partly explains why merchants do not universally accept payment cards and sheds
light on two-sided market interactions. Huynh et al. (2019) estimated network effects
by considering the response of one side of the market to changes in costs on the
other side. Their analysis of the equilibrium usage probabilities suggests that
network effects originating from the consumer side of the market are stronger than
those originating from the merchant side. This implies that the best strategy to
influence equilibrium usage probabilities is to devise consumer-centric policies.
Another possible strategy to increase merchant acceptance is to confer legal
tender status on rCBDCs, although, in general, the effects of this measure
have not been thoroughly assessed in the literature. Rather than measures
designed to appeal consumers and merchants, some jurisdictions might opt to grant
legal tender status to rCBDCs (Committee on Payments and Market Infrastructures
and Markets Committee, 2018).16 However, there has been little discussion of this
option (one exception is Bindseil et al., 2021). Related academic discussions do not
generally focus on the introduction of new payment instruments denominated in an
existing currency (for example, introducing digital money alongside cash), but on the
15

A two-sided market is defined as two sets of agents interacting through a platform or intermediary in
which the decision of one agent affects the outcome of the other through externalities (Rysman, 2009).
The interactions between the parties give rise to a chicken-egg problem where “to attract buyers, an
intermediary should have a large base of registered sellers, but these will be willing to register only if
they expect many buyers to show up” (Caillaud and Jullien, 2003). Moreover, the utility that a user
derives from the consumption of a good depends on the number of other people consuming the good.
The pricing policy of the two-sided network thus differs from standard pricing, where marginal revenues
are equal to marginal costs. The price for the service should be set at a level which will be distributed
between the two sides of the market, depending on the demand elasticity of the two parties. The side of
the market with the lowest price elasticity of demand should potentially bear more costs.

The definition of legal tender varies across legal systems. The traditional definition is that a currency
that is legal tender is that accepted by a creditor in payment of a debt. In its strictest definitions, it would
involve obliging merchants or other intermediaries to accept rCBDCs for payments.

introduction of new currencies. However, some findings may be relevant for rCBDCs.
For example, monetary history shows that legal tender laws may not be sufficient to
guarantee the acceptability of a new currency, and that the old currency might
continue to circulate where such a law cannot be adequately enforced and the
number of people using the new currency is too low (Selgin, 1994; Lotz and
Rocheteau, 2002). History also shows cases in which a new payment instrument
denominated in an existing legal tender currency failed to be adopted; this was the
case with the Susan B. Anthony dollar coin (see Caskey and St. Laurent, 1994).
Although these conclusions cannot be directly extrapolated to rCBDCs, this literature
shows that further research would be needed to determine to what extent and under
what conditions legal tender would increase adoption and what the associated costs
would be for private players. For example, the Finish Avant, a digital money issued
by the Bank of Finland in the 1990s (see Section 4.1), was not legal tender because
it was considered to be unreasonable to oblige merchants or creditors to accept emoney given that they would have to invest in new equipment (Grym, 2020). But the
mandatory participation of certain private players to kick-start network effects might
be important for the adoption of public payment infrastructures (although not strictly
related to rCBDCs, this was seen in the case of the Pix, the Brazilian retail instant
payment system (see Duarte et al., 2022)).

3.5

Conclusions: lessons relating to users’ needs and rCBDC
adoption
Business, economic, and innovation research can help central bankers frame
their investigations of rCBDC adoption. The considerations set out in the
business reports surveyed and the strands of literature analysed in this section may
help in narrowing down the set of feasible design options available to central banks
to fulfil their stated policy goals. A set of possible lessons extracted from this section
are set out below.
•

In a highly competitive market with an increasing number of players
challenging incumbents, central banks would need to enter into
appropriate strategic alliances. Central banks, with no experience in the retail
payments markets, are unlikely to succeed alone. They should seek to partner
with banks or non-bank players to ensure the success of any rCBDC. One
possible way of doing this is to develop a framework through which the private
sector could make innovations to improve consumers’ experience of rCBDCs
(for example, a platform that could also be used by the private sector to develop
consumer interfaces, such as mobile apps). Some authors even suggest that
there is no need for an rCBDC in current payments markets and that a retail
payment system organised, or orchestrated, by the central bank might be a
better alternative (Bofinger and Haas, 2020).

•

Central banks should carefully assess the perceived usefulness and ease
of use of their product as compared with existing and future products in
the market. Judging from publicly available information (see Table 1 in the
previous section), most design requirements discussed by central banks are still

very vague (for example, they use adjectives such as “innovative” or
“competitive”). To ensure adoption, there should, at the very least, be a
concrete assessment of how the new technology will improve consumers’
experience in making retail transactions and the degree of effort they will
perceive when using it, which should be little or none. With regard to the more
concrete design requirements set out in Table 1, such as the need to exhibit
cash-like features or offline functionalities, previous cases of failed means of
payment introduced in the market might provide valuable insights. For example,
Jiang (2020) discusses how Mondex conducted 50 trials around the world in the
early 1990s to test acceptance of a stored-value card aimed at replacing cash.
The card had little success given that it did not seem to have clear advantages
over cash. Similarly, Grym (2020) discusses how the Finnish rCBDC launched
in the 1990s was designed to resemble cash as much as possible, but failed to
achieve the expected adoption success (as discussed in detail in Section 4).
These considerations may greatly narrow the design options as well as the use
cases discussed by central banks to fulfil their stated goals.
•

To increase the likelihood of adoption, rCBDCs should exhibit attributes
that have been found to positively influence payment choice, as
investigated in the research literature. To foster adoption success, central
banks should aim to achieve top-of-wallet status for any future rCBDC front-end
devices. Huynh et al. (2020) and Li (2021) show how certain payment attributes
could increase consumers’ preference for a given rCBDC. The literature
surveyed in this section suggests that the attributes positively affecting payment
choice are primarily: a reduced cost to the consumer, benefits and rewards,
transaction speed, ease of use, privacy, security (reduced risk of theft or loss of
the payment instrument) and budgeting usefulness. These attributes are clearly
defined and could help concretise the desired features.

•

As with mobile payments, obstacles might arise in the early stages of the
diffusion and adoption of rCBDC payments unless they are addressed at
the initial conception and design stages, for example through prototype
testing. The literature exploring the determinants for adoption of an innovation
in the early stages, together with success and failure case studies of new
means of payment introduced in retail payment markets (see, for example,
Amoroso and Magnier-Watanabe, 2012) might provide valuable lessons for
central banks that would enable them to mitigate these potential problems.
Prototype testing is one possible strategy that might serve as a predictor of
perceived usefulness, ensure that costs are reduced and lead to more
successful adoption (Davis and Venkatesh, 2004).

•

Initial strategies might focus on concrete uses (store of value or personto-person transactions) to attract consumers and promote other uses at a
later stage (for example, POS transactions). For instance, and strictly from a
users’ perspective, it has been argued that the current increase in demand for
safe assets (for example, banknotes in circulation) shows that rCBDCs could
fulfil a store-of-value function for consumers (Berentsen and Schär, 2018;
Bofinger and Haas, 2020, Muñoz and Soons, 2022). Arguably, this could lead to

stronger initial adoption of rCBDCs in certain implementations. However, as
seen in the previous section, this seems to run counter to the views of some
central banks given the increased risks of financial disintermediation. Some
middle-ground solutions, such as holding limits, would probably not be attractive
to users who have alternative options available that have no limitations.
Focusing on just some concrete payment-related use cases could also build
inertias that would work against the adoption of other uses at a later stage.
Jiang (2020) suggests that enabling rCBDCs for person-to-person transfers
could promote their use in person-to-business transactions at a later stage, as
happened with successful payment systems such as Swish in Sweden, WeChat
in China or Interac e-Transfer in Canada.
•

rCBDC projects should also adapt their design strategies to clear trends
observed in the retail payments market, such as increasing privacy and
security awareness. Given that fraud and data breaches are widespread in
some regions, consumers are increasingly demanding privacy and security in
payments. Central banks could take this opportunity to offer technologies that
ensure privacy given that this is likely to generate trust in rCBDCs and has been
found to be an important factor in the adoption of innovations (Chandra et al.,
2010; Gao and Waechter, 2017). In this regard, current discussions show that
central banks are aware of the importance of privacy to consumers and of the
necessary balance between providing privacy and ensuring compliance with
money laundering and similar requirements. The question will be whether
innovations originating in the private sector could outcompete solutions offered
by rCBDCs, for example if consumers were to perceive private solutions as
being more effective than central bank options at ensuring privacy and security.

•

Central banks should bear in mind that payment choice is also influenced
by circumstantial determinants, which could be helpful in finding niches
where other payment instruments do not have an existing advantage.
These determinants vary widely given that they tend to be related to the
situation and the characteristics of a transaction, the individual’s payment
habits, or society’s norms. They are generally driven by constraints (for
example, cards are less widely accepted for small-value payments). For
strategic purposes, central banks might want to design rCBDCs in such a way
that they overcome these constraints, for example by focusing on certain
transaction sizes or greater use in certain physical locations.

Lessons from past and ongoing rCBDC
initiatives
In addition to the dimensions analysed in the previous section, past and
ongoing rCBDC initiatives provide lessons for central banks about potential
obstacles to adoption that may be unique to public digital monies. This section
describes certain rCBDC and digital public money initiatives. Although small in
number and with their own particularities, they could provide additional lessons on
potential obstacles to rCBDC adoption, supplementing those extracted in Section 3.
To that end, Section 4.1 describes two past retail public digital money initiatives,
Section 4.2 analyses the available information on a number of selected rCBDC
initiatives, and Section 4.3 extracts lessons from the initiatives described in the
previous two points.

4.1

Past rCBDC initiatives: the Finnish “Avant” and the
Ecuadorian “Dinero Electrónico”
Valuable lessons can be drawn from what can be considered to be the world’s
first rCBDC, the Finnish “Avant”, launched by the Bank of Finland in the
1990s. According to Grym (2020), the Avant smart card was based on an advanced
technology that was ahead of its time, similar to that used by today’s debit and credit
cards. The design was intended to replicate cash features as far as possible. The
idea was to make Avant cards easy to use, widely accepted, anonymous, free of
charge, enable offline transactions, efficient and safe. Avant was positioned as a
low-value payment card given that no fees were supposed to be charged for
payments, unlike debit and credit card transactions. Its issuance cycle was similar to
that of the cash cycle. It was expected that reloadable Avant smartcards would
replace up to half of coins and small denomination banknote transactions, thereby
becoming a dominant payment method for low-value transactions.
We may wonder why Avant, with such superior technology and careful design,
did not succeed. A few years after its roll-out, the Bank of Finland sold the Avant
technology to commercial banks. However, once debit cards became less expensive
and commercial banks adopted smart card technology, the Avant card became
obsolete and was subsequently discarded. Grym (2020) explains that even in its
infancy the Avant project attracted a degree of distrust on the part of the banking
sector which saw the card as a possible competitor to existing instruments. However,
both the central bank and the private sector shared the common goal of potentially
reducing cash handling costs through the issuance of Avant. Lastly, Avant card
usage fees were gradually aligned, in practice, with those of debit cards and demand
for it consequently plummeted. This increase in fees arose from the costs of the
operating system for reloading cards, which had not been accounted for at Avant’s
inception. All in all, even though it exhibited cash-like features such as anonymity

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

and central bank backing (a feature which was not perceptible by the everyday user),
Avant did not achieve the goals of replacing demand for cash and reducing cash
handling costs.
The Ecuadorian “Dinero Electrónico” (DE) version of electronic money also
provides valuable insights into potential obstacles to the adoption of rCBDCs.
The DE was a mobile payment system developed under the centralised
administration of the Central Bank of Ecuador between 2014 and 2018 (Campuzano
Vásquez et al., 2018; Arauz et al., 2021). According to Arauz et al. (2021), it was
intended to increase financial inclusion and reduce the need for the central bank to
hold and distribute cash (that is to say, US dollar banknotes). Despite considerable
effort by the Ecuadorian Government, such as a major information campaign
(Campuzano Vásquez et al., 2018) and an incentive programme consisting of a
rebate of two percentage points on the VAT applied for DE users, it was eventually
discontinued. DE was subject to continuous criticism from the time of its
implementation, in particular as a result of (i) the perception that it was not fully
backed by cash and hence placed dollarisation at risk, (ii) the fact that it could not be
used to make international payments, (iii) its potential to act as a surveillance
programme, (iv) strong opposition by cash users, who preferred a more tangible form
of money, and (v) the opposition of high-street banks, which saw the DE as a threat
to their own payments business (Arauz et al., 2021). Lack of trust in the system
seems to have been a crucial factor in the DE’s failure (White, 2018). Arauz et al.
(2021) point to a number of factors that could have led to a better outcome for the
DE. Notably, enabling the banking ecosystem to expand the number of cash-in or
loading outlets, using the DE for public-sector expenditure, adequately addressing
tensions with the private banking sector and incentivising adoption through a positive
starting balance in new accounts.

4.2

Ongoing pilot projects and roll-outs
In the wake of the Avant and DE initiatives, some central banks have rolled out
or are conducting pilot projects aimed at the issuance of rCBDCs. Some of
these pilot projects are restricted to assessing the technological feasibility of rCBDC
implementations and therefore do not provide useful insights into users’
perspectives. Other pilot projects and roll-outs consist of deployments of rCBDCs in
a real environment, with an open or restricted number of participants depending on
the country. However, as central banks issuing rCBDCs or conducting pilots in a real
environment have not yet resulted in significant adoption or use data being available,
the lessons that can be extracted are limited at present. We have selected five major
projects, at different stages of progress, which are described below.
•

People’ s Bank of China’s digital yuan or e-CNY: in April 2020 the People’s
Bank of China became the first central bank of a major world economy to roll
out a pilot CBDC. At the end of 2020 China began testing the digital yuan in
different cities across the country, with users being selected through a lottery.
The main stated goal of the e-CNY is to provide a convenient and secure retail
payment system to increase financial inclusion and preserve monetary

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

sovereignty. By the end of 2021, the e-CNY app had 261 million users and had
been used in transactions with a value of RMB 87.6 billion (around USD 12.5
billion) (The People’s Bank of China, 2022). This implies that each wallet was
used for transactions with an average total value of only around RMB 317
(under USD 50). In this regard and based on more comprehensive official data
for October 2021, some analysts find that most wallets were empty at that time
and not actively used for transactions, the average balance being around RMB
3 (under USD 0.5) (Kumar, 2022).
•

Central Bank of Nigeria’s eNaira: the Central Bank of Nigeria officially
launched the “eNaira” on 25 October 2021. The stated objectives are increased
financial inclusion, improvement of the payment system, and revenue and tax
collection (Central Bank of Nigeria, 2021). Customers will be able to access the
eNaira through the eNaira wallet in their phone’s app store. Nearly 500,000
people downloaded the digital wallet in the first three weeks following its roll-out
(Onu, 2021), with around NGN 62 million (corresponding to approximately EUR
130,000) of this virtual currency being traded since its introduction. In August
2022, Central Bank of Nigeria’s Governor stated that the eNaira app had been
downloaded about 840,000 times and had about 270,000 active wallets, used to
carry out transactions worth NGN 4 billion (under USD 10 million) (Crawley,
2022). This implies that, almost one year after its roll-out, each eNaira wallet
was used for transactions of an average total value of under NGN 5000 (around
USD 11) and that the wallets are currently actively used by less than 0.15% of
Nigerian citizens.

•

Eastern Caribbean Central Bank (ECCB) DCash: in March 2021 the ECCB
launched its DCash CBDC pilot project. The project was set to last for twelve
months and to include six ECCB country members.17 The aim is to achieve
deeper financial inclusion, economic growth, resilience and competitiveness
(Eastern Caribbean Central Bank, 2021). Although no progress report or
adoption and use data have been published, it would seem that DCash
experienced major technical difficulties leading to service interruption from
January 2022 to March 2021. According to an Eastern Caribbean Central Bank
press release, this event serves as a “learning experience” for the entire central
bank digital currency community (Eastern Caribbean Central Bank, 2022).

•

Central Bank of the Bahamas (CBOB) Sand Dollar: the CBOB launched
Sand Dollar in October 2020. The intention was that Sand Dollar would
resemble the experience and convenience of cash, allowing for reduced service
delivery costs, increased transactional efficiency, and an improved overall level
of financial inclusion in the country. At present, data on adoption and use is
scarce. International Monetary Fund (2022) shows that the Sand Dollar
represents less than 0.1 percent of currency in circulation and that there are
“limited avenues” for its use. According to this institution, although the Sand
Dollar has the potential to foster financial inclusion, continuing efforts are

Anguilla, Antigua and Barbuda, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and The
Grenadines.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

required to strengthen its security and systems resilience and to safeguard
financial integrity.
•

4.3

Sveriges Riksbank’s e-krona: Sveriges Riksbank’s “e-krona” project has
completed a pilot stage that was designed to show the technical feasibility of
rCBDC implementations and what a future rCBDC could look like (Sveriges
Riksbank, 2020b). As cash is currently the only central bank-issued form of
money available to the public and its use is declining,18 Sveriges Riksbank
believes that a digital complement to cash would preserve the safety and
efficiency of the payment system. Although Sweden is moving forward
somewhat faster than other advanced economies with rCBDC projects, no
decision has yet been made on the issuance of an rCBDC.

Conclusions: lessons from past and ongoing rCBDC
initiatives
Previous and ongoing initiatives with digital monies issued by central banks
can provide lessons about obstacles to adoption. However, there are few such
cases and all of them have their national peculiarities, so that any conclusions
should be treated with caution. Given the limited adoption and the scant use data
available, it is still too early to extract clear lessons from ongoing rCBDC initiatives
such as the pilot projects and recent roll-outs. However, early data on wallets and
total transaction values (for example, for the e-CNY and eNaira), together with the
service interruption experienced by DCash, may suggest that that ongoing rCBDCs
initiatives are not without important adoption obstacles or technical challenges. The
conclusions that could be extracted from these initiatives are summarised below.
•

Real-world trials provide more valuable lessons than controlled
experiments. Kim and Mohan (2020) believe that projects fully rolled out in
real-life situations are more valuable than controlled experiments in gauging the
interests and considerations of private-sector and government stakeholders.
These aspects have far-reaching consequences that are too complex to be
detected even in a highly controlled pilot environment. This seems to be borne
out by the examples of the Finish Avant and the Ecuadorian DE, as discussed
above. Countries such as China, Nigeria, the Bahamas, and the Eastern
Caribbean countries are currently following this real-world trial approach. In this
regard, given the complexity of anticipating which design options would work
best based on research or expert investigation, or even through controlled pilot
projects, some analysts suggest that rCBDCs are characterised by a last-mover
rather than first-mover advantage (Koning, 2020).

•

Some of the features assumed by central bankers to be a comparative
advantage for rCBDCs may turn out not to be essential for consumers. In
this regard, it would seem that, in some instances, digitally replicated cash-like

Based on Sveriges Riksbank statistics, the currency in circulation in Sweden has decreased
continuously since 2007. However, in 2018 circulation increased by 7.2%. The annual variation in 2019
and 2020 was 2,1% and -1%, respectively (Sveriges Riksbank, 2020a).

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

features may only have a limited impact on wider adoption, all other adoption
factors being equal. Despite the careful design of the Finnish Avant to replicate
cash-like features (anonymity, ease of use, offline payments, intended use for
low-value payments, a similar issuance cycle, etc.), it did not manage to replace
the transactional function of cash or reduce cash handling costs, as it was
expected to do. Furthermore, the fact that it was central bank money or central
bank-backed was not really perceived by the everyday user (Grym, 2020),
which seems to match with the findings of a recent survey (Deutsche
Bundesbank, 2021). This should prompt central banks to reassess whether
their more concrete design requirements are in line with consumers’
expectations (as analysed in Section 3) and, if so, to what extent this advantage
can really make a difference as compared with other means of payment.
•

Superior technology does not ensure wider adoption. Of the design
requirements described in Table 1, one that is typically mentioned by central
banks is that rCBDCs should be innovative. It might be tempting to interpret this
as meaning that they should be technologically superior to other payment
systems or devices. In the 1990s Avant cards were based on state-of-the-art
technology superior to that of credit and debit cards. However, this did not lead
to widespread adoption. Innovativeness should, therefore, always be focused
on the subjective perceptions of consumers, for example by increasing the
perceived usefulness or perceived ease of use as compared with current
payment options.

•

Implementations with an intended zero cost for users may not consider
costs occurring at a later stage. In the Avant case, although the new means
of payment was intended to be free of charge for users, the costs of operating
the system obliged banks to add fees at a later stage. Today too, commercial
banks in some countries are attempting to pass on to consumers the costs
related to cash (Zamora-Pérez, 2022), which had been free of charge to users.
The assumption that rCBDCs will be of no cost to users just because they are
free of charge may therefore be too strong. The costs, or lack of them, may
depend on the design of the back-end system and issuance cycle. It is likely
that operating and logistical costs will be incurred and central banks will need to
decide who should bear those costs (users, private intermediaries or
taxpayers).

•

Collaboration and synergies between public authorities and private
companies would seem essential if rCBDCs are not to be perceived by the
market as a threat. This lesson is particularly apparent from the – now extinct
– Avant and DE initiatives. Commercial banks, other financial institutions and
technology partners can contribute with their knowledge to making a success of
rCBDCs. In addition, including these players and giving them room to grow
within the rCBDC network could stimulate competitiveness and efficiency in the
market. In this regard, Kim and Mohan (2020) note that the Bahamas Sand
Dollar development team have focused on creating an open front-end rCBDC
solution where financial intermediaries can introduce rCBDC-based financial

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

products and services. In analysing the early lessons of the Sand Dollar project,
they highlight the fact that “grassroots engagement is vital”.
•

Information campaigns and tax incentives may not make up for a lack of
consumer trust in and support for rCBDCs. The case of Ecuador’s DE
provides an example of how strong communication initiatives or economic
incentives may not be sufficient to counter a lack of trust on the part of the
market and the public (White, 2018; Arauz et al., 2021). However, it is difficult to
know how to gain consumers’ trust and support. It is also difficult to judge, from
the available data, the extent to which support for a product (rCBDC) will be
influenced by trust in the issuer (central banks), potential intermediaries
(commercial banks) or related entities (the government).

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
Lessons from past and ongoing rCBDC initiatives

General conclusions: the importance of
adoption in the rCBDC design choice
conundrum
Central banks intending to introduce an rCBDC face, or are likely to face, a
design choice problem where they have to reconcile several dimensions, one
of which is achieving the desired level of rCBDC adoption. At the risk of
oversimplification, the rCBDC design choice problem faced by central banks can be
summarised as follows: how to maximise the effectiveness of the desired and
implemented policy goals, subject to certain constraints19 such as (i) the “do no
harm” principle or avoiding negative effects for the economy and (ii) ensuring
sufficient adoption and acceptance by consumers and merchants. The hierarchy of
policy goals varies among central banks, both over time and as a result of local
specificities. However, irrespective of this hierarchy, central banks would need to
investigate how to achieve the desired level of adoption of their rCBDC by
consumers and merchants. This paper shows that, as opposed to the other
constraint, namely the potential adverse economic impact of rCBDC issuance,
rCBDC adoption has not yet attracted sufficient attention in public debate nor among
researchers, with only a few published works contributing to the public discussion
thus far. In many research papers and policy reports, adoption is taken as a given.
The purpose of this paper is to discuss whether this assumption holds true by
investigating the necessary, though not yet sufficient, elements to be adopted in
rCBDC designs and to outline some of the adoption obstacles faced by previous
means of payment or rCBDC initiatives.
The paper suggests that for certain design elements central banks may find
themselves on the horns of a dilemma in making design choices. In some
settings, in choosing certain design features to fulfil certain goals, central banks
would need to decide between two of the following three aspects: preserving the
hierarchy of their desired goals, avoiding negative economic effects, or adopting
strategies to increase the likelihood of rCBDC adoption. For example, the paper
shows that the store-of-value function of cash has been in high demand in recent
years, and as a design element it could increase initial adoption rates. Although this
is more speculative, this could, in turn, promote other (transactional) uses at a later
stage, and hence contribute to the general rCBDC goal of bringing improvements in
retail payments markets. However, most central banks would seem to prefer to avoid
the potential bank disintermediation effect and would propose store-of-value limits for
rCBDCs. Deciding between these two options may depend on the central bank’s
hierarchy of desired policy goals (improvements in retail payment markets vs.
financial stability), as well as the estimated risk of bank disintermediation. Another
example is the use of negative remuneration to augment central banks’ monetary
19

As indicated in the introduction, other constraints, such as technical feasibility and legislation and
regulations in the relevant jurisdiction, such as those relating to money laundering, are not analysed in
this paper.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
General conclusions: the importance of adoption in the rCBDC design choice conundrum

policy toolbox. Research shows that cost is an essential attribute in the choice of a
means of payment. If negative remuneration results in consumers facing higher
costs, they are likely to move away from the rCBDC. This would lead to insufficient
demand for the monetary policy tool, potentially making it ineffective. In sum, we
suggest that exploring in detail the overlooked constraint of ensuring wide rCBDC
adoption might lead to a reconsideration of certain policy goal hierarchies.
A comprehensive analysis of the multiple dimensions affecting adoption may
help in assessing how, and to what extent, design requirements established by
central banks match consumers’ preferences. As seen in Section 2, most
academic literature and policy reports on rCBDCs do not consider consumers’ needs
and preferences in sufficient depth. In addressing design requirements to fulfil policy
goals, most of them are still vague (for example stating that rCBDCs should be
“innovative”, “competitive”, “efficient”, etc.). Similarly, no in-depth analysis has been
published that would make it possible to ascertain whether more concrete design
features really tally with consumers’ expectations. One exception to the inadequacy
of existing analyses is the scant but growing body of empirical literature exploring the
factors behind, and obstacles to, potential adoption. However, given that the findings
are generally based on specific aspects of adoption (such as data on early
perceptions of rCBDC introduction or preferences for existing means of payment), it
is still too early to extract any general conclusions and further research is needed.
With this paper, we aim to provide a more systematic framework for consideration of
the main aspects of adoption that would make it possible to extract relevant lessons
and discuss in detail design choices that might meet consumers’ needs.
Valuable lessons on the design features that are generally attractive to users
can be obtained from market and business reports, the literature on the
adoption and diffusion of innovations, and the literature on payment choices.
The lessons extracted are discussed in Section 3.5 and include: (i) finding strategic
alliances in a highly competitive market with increasing numbers and types of
competitors; (ii) developing rCBDCs that exhibit the elements of perceived
usefulness and perceived ease of use, as described in the literature; (iii) designing
rCBDCs with the attributes that are clearly defined in the literature and have been
found to influence continued use of means of payment, such as reduced costs,
transaction speed, ease of use and budgeting usefulness; (iv) identifying potential
adoption obstacles from the rCBDC’s inception, for example through early prototype
testing; (v) developing early strategies to increase initial adoption, for example
focusing on concrete uses, such as store of value or person-to-person transactions,
that might prompt other uses in later stages; (vi) trying to exploit recent trends in the
retail payment markets, such as increasing privacy awareness; and (vii) bearing in
mind during the design process the fact that circumstantial determinants also
influence payment choice (these determinants usually come from external
constraints that rCBDCs could be designed to overcome).
Past and ongoing rCBDC initiatives seem to point to adoption obstacles that
cannot be properly identified solely by research on adoption and payment
choices. In Section 4, we describe past initiatives of public digital monies that did
not succeed, as well as ongoing pilot projects and roll-outs. However, there are few

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
General conclusions: the importance of adoption in the rCBDC design choice conundrum

such cases and all of them have their national peculiarities, so that any conclusions
should be treated with caution. Given the limited adoption and the scant use data
available, it is still too early to extract clear lessons from ongoing rCBDC initiatives
such as the pilot projects and recent roll-outs. However, early data on wallets and
total transaction values (for example, for the e-CNY and eNaira), together with the
service interruption experienced by DCash, may suggest that that ongoing rCBDCs
initiatives are not without important adoption obstacles or technical challenges. The
following set of lessons are discussed in Section 4.3: (i) real-world trials are needed
to understand potential adoption obstacles, and, in this regard, rCBDCs may be
characterised by a last-mover advantage; (ii) some design features assumed by
central bankers and researchers to be a comparative advantage of rCBDCs may turn
out not to be essential for consumers; (iii) payment systems or devices with superior
technology to that of existing products does not necessarily ensure wider adoption,
hence innovativeness should be focused on increasing consumers’ subjective
perception of usefulness; (iv) implementations with an intended zero cost for the user
may not consider infrastructure-related costs that might be incurred at a later stage;
(v) partnerships with the private sector, at least to avoid being perceived as a threat,
would seem essential; and (vi) communication campaigns and tax incentives may be
not be enough to offset a lack of consumer trust in rCBDCs, and the question of how
to achieve that trust is still open.
The above recommendations are not exhaustive and are intended as a
contribution to the necessary discussion of the still largely unexplored topic of
rCBDC adoption. More attention needs to be devoted to this topic if the likelihood of
achieving the desired rCBDC adoption targets is to be increased. Market and
innovation research, empirical work based on quantitative and qualitative survey
data, prototype testing and, in particular, more data on real trials would also help to
identify more key elements for, and potential obstacles to, rCBDC adoption, and how
these depend on the particular features of local markets and varying consumer and
merchant preferences. This paper can help central banks and academics cover all
these topics in order to provide a systematic framework for the investigation of
rCBDC adoption and encourage academic discussion of aspects that have, thus far,
been neglected in the public discussion.

Ensuring adoption of central bank digital currencies – An easy task or a Gordian knot? –
General conclusions: the importance of adoption in the rCBDC design choice conundrum

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Acknowledgements
The authors thank Helmut Stix, Doris Schneeberger, and Patricia Roa Tejero for their careful and insightful comments during the
conception and throughout the preparation of this paper. They also thank António Rua, Johana Kimmerl, Giorgia Rocco, Gabriele Sene,
Louis-Alexandre Bayol, and members of the European Central Bank research network EURECA who kindly reviewed an earlier version
of this paper and provided valuable suggestions. The findings expressed in this paper reflect only the views of the authors, and do not
necessarily reflect those of the European Central Bank or Banco de España.
Alejandro Zamora-Pérez
European Central Bank, Frankfurt am Main, Germany; email: alejandro.zamora@ecb.europa.eu
Eliana Coschignano
European Central Bank, Frankfurt am Main, Germany; email: eliana.coschignano@ecb.europa.eu
Lorena Barreiro
Banco de España, Madrid, Spain; email: lorena.barreiro@bde.es

60640 Frankfurt am Main, Germany
+49 69 1344 0
www.ecb.europa.eu

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electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the authors.
This paper can be downloaded without charge from the ECB website, from the Social Science Research Network electronic library or
from RePEc: Research Papers in Economics. Information on all of the papers published in the ECB Occasional Paper Series can be
found on the ECB’s website.
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