New Study on Central Bank Digital Currency Communication and its Market Effects

The Journal of the Royal Statistical Society has published a new peer-reviewed article examining how central bank communication about digital currencies influences the stablecoin market. The article, “Central bank digital currency rhetoric and stablecoin market responses”, was co-authored by Researcher Lambis Dionysopoulos, and Dr Christos Makridis, Adjunct Faculty at University of Nicosia (UNIC).

The study leverages global data from 2020-2023 to investigate how central banks’ public statements about Central Bank Digital Currencies (CBDCs) affect stablecoin dynamics. It finds that when central banks deliver pro-CBDC messages, the supply of stablecoins declines significantly, yet retail attention to them increases. These anticipatory market reactions suggest that central bank rhetoric alone, even before any CBDC is operational, can shape market expectations and behaviour.

The researchers note that these findings “highlight that central bank communication is already a form of policy, but also hint at a potential substitutability between CBDCs and stablecoins”.

The paper has important implications for the design and rollout of CBDCs, particularly for regulators and stablecoin issuers navigating a rapidly shifting policy environment. It calls for a balanced approach that allows room for both public and private digital currencies to coexist, while avoiding the unintended displacement of private innovation through signalling alone.

This research contributes to the University of Nicosia’s broader commitment to shaping the future of digital finance through evidence-based policy insights. The full article is available open access in the Journal of the Royal Statistical Society.