Game-Theoretic Analysis on CBDC Adoption

As an important blockchain application, CBDC (Central Bank Digital Currency) has received significant worldwide attention as it can restructure financial market, affect national currency policies, and introduce new regulation policies and mechanisms. It is widely predicted that CBDC will introduce numerous digital currency competitions in various aspects of the global financial market, and winners will lead the next wave of digital currency market. This paper applies the game theory to study the competitions between different countries, in particular to analyze whether they should adopt the CBDC program. We propose two game-theoretic models for CBDC adoption, both analyzing whether to adopt the CBDC program via the Nash equilibrium. Both game-theoretic models draw the same conclusion that each country should adopt the CBDC program regardless of the choices of other counties. In other words, current currency leaders should adopt CBDC because it may lose the premier status, and other countries should adopt CBDC otherwise they risk of getting even further behind in the digital economy. According to our game-theoretic models, the current market leader who has 90% of market shares may lose about 19.2% shares if it is not the first mover.