Central Bank Digital Cash and Cryptocurrencies: Insights from a New Baumol–Friedman Demand for Money

Abstract

Abstract This article analyses ongoing changes in the supply of alternative media of payments (MOPs). The comparison between old (cash and deposits) and new (cryptocurrencies and central bank digital currencies) MOPs is based on a novel definition of money where a MOP has three properties: the first two are the standard functions of medium of exchange (liquidity costs) and store of value (opportunity costs) and the third is the novel function of store of information (privacy costs). Given such properties and that the evolution of the different MOPs likely depends on individual preferences, the relevance of experimental economics is highlighted.