CBDCs Face ‘Chicken-and-Egg Problem’ When It Comes to Adoption: IMF
Tanzeel Akhtar has been covering the cryptocurrency and blockchain sector since 2015. She has written for the Wall Street Journal, Bloomberg, CoinDesk and Bitcoin Magazine.
Central Bank Digital Currencies (CBDCs) face a “chicken-and-egg” problem, says the International Monetary Fund (IMF), where consumer adoption depends heavily on merchant participation, and vice versa.
The phrase “chicken-and-egg” is a metaphor used to describe a situation where two interdependent factors make it difficult to determine which one should come first.
In this case, the IMF highlights merchants may be reluctant to adopt CBDCs if consumers aren’t using them, while consumers may avoid CBDCs if merchants don’t accept them.
CBDCs are digital forms of a country’s national currency, issued and regulated by the central bank. Unlike cryptocurrencies, which are decentralized, CBDCs are fully backed by the central authority.
They aim to provide the same functions as physical currency but in digital form, offering a safe, regulated alternative to private digital currencies and payment systems.
Central banks around the world are exploring CBDCs to modernize payment systems, improve financial inclusion, and reduce reliance on cash.
In the retail payments market, coordination challenges are common. Products can struggle if stakeholders hesitate to adopt them, fearing others won’t.
This dynamic applies to CBDCs, where both consumers and merchants might be slow to engage if they are unsure about widespread acceptance. This creates a self-reinforcing cycle of hesitation that central banks must address to foster adoption.
Central banks, as the primary drivers of the CBDC initiative, can play a proactive role in aligning expectations and creating a consensus among
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