Conventionalists, Pioneers and Criminals Choosing Between a National Currency and a Global Currency
Conventionalists, Pioneers and Criminals Choosing Between a National Currency and a Global Currency

Summary/Abstract: The article analyzes how conventionalists, pioneers and criminals choose between a nationalcurrency (e.g. a central bank digital currency) and a global currency (e.g. a cryptocurrency suchas Bitcoin) that both have specific characteristics in an economy. Conventionalists favor what istraditional and historically common. They tend to prefer the national currency. Pioneers (earlyadopters) tend to break away from tradition, and criminals prefer not to get caught. They both tendto prefer the global currency. Each player has a Cobb-Douglas utility with one output elasticityfor each of the two currencies, comprised of backing, convenience, confidentiality, transactionefficiency, financial stability, and security. The replicator equation is used to illustrate theevolution of the fractions of the three kinds of players through time, and how they choose amongthe two currencies. Each player’s expected utility is inverse U-shaped in the volume fractionof transactions in each currency, skewed towards the national currency for conventionalists,and towards the global currency for pioneers and criminals. Conventionalists on the one handtypically compete against pioneers and criminals on the other hand. Fifteen parameter values arealtered to illustrate sensitivity. For parameter values where conventionalists go extinct, pioneersand criminals compete directly with each other. Players choose volume fractions of each currencyand which kind of player to be. Conventionalists go extinct when criminals gain more fromcriminal behavior, and when the parameter values in the conventionalists’ expected utility areunfavorable, causing competition between pioneers and criminals.

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