Network analytics firm FNA has conducted research into Central Bank Digital Currencies (CBDCs) and found that design elements are crucial for widespread adoption. 

Running a digital twin of Spain’s payments ecosystem, FNA’s Carlos León, Jose Moreno and Kimmo Soramäki ran hypothetical scenarios of a retail CBDC and varying adoption rate processes. 

FNA also received publicly available data on attitudes towards payment instruments and stimulated adoption rates under certain conditions. 

The research found that the roll out of a retail CBDC without attractive design options and stimulus for consumers and merchants would result in low and slow adoption rates. 

The research then contrasts this with the inclusion of reverse waterfall functionality – the ability to make payments using funds from another instrument when CBDCs are insufficient – could help foster adoption. 

Despite this, top-up and balance limits were also cited as facets of CBDCs that could curb adoption rates, while mitigating possible disintermediation generated by the issuance of a CBDC. 

FNA’s research also falls in line with the slow adoption rates of CBDCs in Nigeria, The Bahamas, Jamaica and China. 

León commented: “By implementing an agent-based learning-by-simulation approach, the complex interdependence between the initial conditions of the retail payment ecosystem and the retail CBDC design options can be modelled and studied before incurring the costs and risks of a learning-by-doing approach.” 

“Adopting a learning-by-simulating approach would enable central banks and other stakeholders to sufficiently and seriously iterate and test, with the simulation evolving into a reliable plan for the design, pilot, roll-out, and adoption of retail CBDCs.”

Overall, the findings suggest that a combination of attractive design options, stimulus policies and specific limits to holding retail CBDC could offer a ‘sweet spot’ for adoption – one high enough to allow for the effective use of a retail CBDC but low enough not to threaten the stability of the financial system.