The attention paid to the role of money as a store of privacy is increasing. In a monetary transaction, full privacy protection coincides with anonymity. In such situations, an empirical question arises: Is anonymity relevant in shaping the demand for money? We attempt to answer this question through laboratory experiments. The results show that anonymity matters and increases the overall appeal of a medium of payment, and that this effect is stronger for risk-prone individuals. Moreover, the trade-off between the two properties of liquidity and return is relatively high – to accept higher illiquidity risks, individuals require a more-than-proportional increase in the expected return. In general, the experiments suggest that the future attractiveness of alternative currencies depends on whether the three properties of money are mixed in a way that is consistent with the individual’s preferences.
- Central bank digital currencies
- Experimental economics
- Money demand
- Private digital currencies
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)