@article{Cong:320020,
      recid = {320020},
      author = {Cong, Lin William and Mayer, Simon},
      title = {The Coming Battle of Digital Currencies},
      address = {2022-03-28},
      number = {2392-2022-606},
      month = {Mar},
      year = {2022},
      abstract = {We model the dynamic global competition among national fat  currencies, cryptocurrencies, and Central Bank Digital  Currencies (CBDCs) in which the strength of a country and  of its currency are mutually reinforcing. The rise of  cryptocurrencies hurts stronger fat currencies, but can  beneft weaker fat currencies by reducing competition from  stronger ones. Countries strategically implement CBDCs in  response to competition from emerging cryptocurrencies and  other currencies. Our model suggests the following pecking  order: Countries with strong but non-dominant currencies  (e.g., China) are most incentivized to launch CBDC due to  both technological frst-mover advantage and potential  reduction in dollarization; the strongest currencies (e.g.,  USD) beneft from developing CBDC early on to nip  cryptocurrency growth in the bud and to counteract  competitors’ CBDCs; nations with the weakest currencies  forgo implementing CBDCs and adopt cryptocurrencies  instead. Strong fat competition and the emergence of  cryptocurrencies spur fnancial innovation and digital  currency development. Our fndings help rationalize recent  developments in currency and payment digitization, while  providing insights into the global battle of currencies and  the future of money.},
      url = {http://ageconsearch.umn.edu/record/320020},
      doi = {https://doi.org/10.22004/ag.econ.320020},
}