Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299352 
Year of Publication: 
2024
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2024-17
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking. We document endogenous heterogeneity and inefficiency in adoption outcomes and explain why higher usage may correspond to lower adoption. Next, we frame the model as a quadratic unconstrained binary optimization (QUBO) problem and apply it to data. Method-wise, QUBO presents an extension to the potential function approach and makes broadly defined network games applicable and empirically feasible, as we demonstrate with a quantum computer.
Subjects: 
Central bank research
Digital currencies and fintech
Digitalization
Economic models
Financial institutions
Payment clearing and settlement systems
Sectoral balance sheet
JEL: 
C6
C71
D4
D85
G
L22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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