An Enquiry into Digital Inequality Implications for Central Bank Digital Currency

Abstract

Central banks around the world have pondered the possibility of a central bank digital currency (CBDC). Advantages of such a currency are perceived technological catch-up, and financial inclusion, inter alia. This paper evaluates the implications of digital inequality on CBDC. The paper finds that indeed digital access, a proxy of CBDC, is positively correlated with financial inclusion but is afflicted by digital inequalities with different or contradictory impacts. For example, an increase in digital access benefits financial inclusion, but owing to inequalities, the increase is at a lower level for older people than for young adults. Further, when the income gap worsens, financial inclusion deteriorates at a higher level for the poor than for the rich. The study concludes that CBDC will be vulnerable to the inheritable e-burdens of digital inequalities. The policy implication is that the baffling risk-averse rigidities of older people towards digital access should be addressed in support of CBDC-linked financial inclusion.