The Role of Financial Sanctions and Financial Development Factors on Central Bank Digital Currency Implementation

Medina Ayta Mohammed (), Carmen De-Pablos-Heredero and José Luis Montes Botella
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Medina Ayta Mohammed: Department of Business Economics (Administration, Management, and Organization), Applied Economics II and Fundamentals of Economic Analysis, Universidad Rey Juan Carlos, Paseo de los Artilleros s/n, 28032 Madrid, Spain
Carmen De-Pablos-Heredero: Department of Business Economics (Administration, Management, and Organization), Applied Economics II and Fundamentals of Economic Analysis, Universidad Rey Juan Carlos, Paseo de los Artilleros s/n, 28032 Madrid, Spain
José Luis Montes Botella: Department of Applied Economy I, Universidad Rey Juan Carlos, Paseo de los Artilleros s/n, 28032 Madrid, Spain

FinTech, 2024, vol. 3, issue 1, 1-16

Abstract: This study investigates the influence of a country’s financial access and stability and the adoption of retail central bank digital currencies (CBDCs) across 71 countries. Using an ordinal logit model, we examine how individual financial access, the ownership of credit cards, financing accessibility by firms, offshore loans, financial sanctions, and the ownership structure of financial institutions influence the probability of CBDC adoption in nations. These findings reveal that nations facing financial sanctions and those with substantial offshore bank loans are more inclined to adopt CBDCs. Furthermore, a significant relationship is observed in countries where many people have restricted financial access, indicating heightened interest in CBDC adoption. Interestingly, no statistically significant relationship was found between the adoption of CBDCs and the percentage of foreign-owned banks in each country. The results show that countries with low financial stability and financial access adopt CBDCs faster. This study expands our knowledge of how a nation’s financial situation influences its adoption of CBDCs. The results provide important and relevant insights into the current discussion of the direction of global finance.

Keywords: central bank digital currencies; financial development; financial access; financial stability; CBDC (search for similar items in EconPapers)
JEL-codes: C6 F3 G O3 (search for similar items in EconPapers)
Date: 2024
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