Andrew Hook
While Central Bank Digital Currencies (CBDCs) have primarily been developed in Global South contexts to enhance ‘financial inclusion’, a key debate within the literature centers on whether the existence of a new form of state issued digital money presents a ‘threat’ to incumbent finance actors. Indeed, while monetary reformers see CBDCs as offering the potential to rebalance power away from the private banking sector and toward the state, commercial banks, on the other hand, see them as a potential new source of economic competition. Moving beyond this ‘zero-sum’ framing, this article develops a framework for examining how CBDCs’ disruptiveness may be contingent on an interplay of institutional design choices, context-specific geographies, and the responses of a range of actors. It applies this framework to an analysis of two pilot CBDC schemes: the Bahamas’ Sand Dollar and The Eastern Caribbean Currency Union’s (ECCU) DCash. Overall, it finds that these two CBDCs are proving less disruptive than anticipated. This is because the CBDC pilots’ ‘intermediated’ models mean that financial incumbents are emerging as central players in, and beneficiaries of, the new CBDC ecosystems. Secondly, Caribbean banking systems remain cash-heavy, meaning that CBDC use is displacing cash and coins, rather than banks’ deposits, shielding banks from disintermediation losses. Thirdly, incumbent actors have found subtle ways of undermining the CBDC rollouts, ultimately slowing down user sign-up and thus protecting the status quo. Overall, the findings highlight how CBDCs in the Caribbean appear to be reconfiguring, rather than challenging, the prevailing political economies of money.