SocioEconomic Challenges (Apr 2024)
Navigating the digital frontier: a comparative examination of Central Bank Digital Currency (CBDC) and the Quantum Financial System (QFS)
Abstract
In the global financial landscape, a transformational shift towards digitization is known, and a comparative analysis of two key components is of particular relevance: central bank digital currency (CBDC) and quantum financial system (QFS). This article explores the dynamic relationship between traditional monetary instruments and new digital currencies, considering the transformative impact and regional nuances of CBDC. The article provides a historical overview of the evolution of the development and implementation of CBDC in the world, analyzes the key factors affecting its implementation in different regions, identifies key technological advances that are the disruptive force of QFS, as well as their impact on the transformation of traditional financial transactions. In the context of the development of CBDC and QFS, the legal frameworks that regulate their work, facilitate or hinder their broad integration into existing financial systems, their impact on traditional monetary policy and, accordingly, on economic stability, inflation and interest rates, and the format of the technological infrastructure are determined, which must be ensured for their successful implementation and operation, as well as the main challenges related to this and ways to solve security and privacy problems in their application. The paper combines qualitative and quantitative analysis to provide a comprehensive and validated dataset for a thorough understanding of digital financial paradigms. Qualitative research was conducted based on structured interviews with experts in the development and implementation of CBDC and QFS, as well as reporting and analytical information on central banks, regulators, and other financial institutions. The empirical study is based on the built OLS model, which describes the dependence coefficient using CBDC (the share of the population that uses it) on the traditional interest rate set by the central bank (taking into account the corrections for the possibility of variation of its changes and unobservable factors). The Python programming language with R libraries and the Stata software package are used for modeling. Tests confirmed the model's statistical significance and high R-squared value (0.756 ) to begin its ability to explain a significant portion of the variability in CBDC adoption rates. The results showed that, on average, per skin unit increase in the traditional interest rate, post-CBDC rate growth is expected to be 1.74%; when the conventional interest rate is zero, the settlement rate after CBDC is 11.14%. The results of this study can be used to predict the dynamics of public perception of digital currencies. In addition, central banks can adjust interest rates to stimulate or moderate the adoption of CBDCs based on broader strategic macroeconomic measures: 1) during economic downturns, higher interest rates can be used to stimulate the adoption of digital currencies as an alternative financial instrument; 2) during periods of economic growth, interest rates may be lowered to mitigate the intended overheating of CBDC adoption.
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