AN IMPACT OF FINANCIAL TECHNOLOGY ON DIGITAL CURRENCY IN BANKING SECTOR

Abstract

This study investigates how a country’s financial access and financial stability influence the adoption of retail central bank digital currencies (CBDCs) across 71 nations. Using an ordinal legit model, we analyze the effects of individual financial access, credit card ownership, and firms’ access to financing, offshore loan exposure, financial sanctions, and the ownership structure of financial institutions on the probability of CBDC adoption. The findings show that countries experiencing financial sanctions and those with high levels of offshore bank loans are significantly more likely to adopt CBDCs, reflecting a strategic move to enhance monetary independence and reduce reliance on traditional global financial networks. Additionally, the results indicate that nations with limited financial inclusion where large segments of the population face restricted access to financial services display a stronger inclination toward CBDC implementation as a means to expand financial accessibility. Conversely, no statistically significant relationship was identified between CBDC adoption and the share of foreign-owned banks within a country. Overall, the results demonstrate that countries with lower financial stability and weaker financial access tend to adopt CBDCs more rapidly. This study contributes to a deeper understanding of how financial pressures and structural conditions shape national motivations for embracing CBDCs and offers relevant insights for policymakers formulating digital currency strategies.

Central bank–issued digital currencies (CBDCs) have generated substantial global interest due to their potential to enhance payment efficiency, reduce transaction costs, expand financial accessibility, and enable more responsive monetary policy. Despite these advantages, CBDCs remain in an early stage of development, and adoption levels vary widely across countries. This study employs partial least squares structural equation modeling (PLS-SEM) to examine the nonlinear relationships between key national development indicators and CBDC deployment across 67 countries. The analysis investigates how technological, environmental, legal, and economic factors shape national readiness for CBDC adoption. The results reveal a statistically significant and positive relationship between CBDC adoption and both the level of democracy and public confidence in governance. In contrast, regulatory quality and income inequality show a negative association with CBDC adoption, while network readiness, foreign exchange reserves, and sustainable development goal rankings display no significant influence. These findings suggest that countries with stronger democratic institutions and higher governance trust are more inclined to advance CBDC initiatives. The study concludes by outlining important policy considerations for broader CBDC implementation and identifying areas for future research on macro-level digital currency adoption.