Central Bank of Luxembourg research finds CBDC could capture 5% to 92% of payment value depending on wallet top-up design

The Central Bank of Luxembourg published Cahier d’études No. 193 assessing potential consumer adoption of a central bank digital currency (CBDC) in Luxembourg as a means of payment, using a micro-simulation model calibrated on reported payment choices. The study concludes that CBDC usage would depend heavily on merchant acceptance and operational features such as top-up mechanisms, costs and wallet limits. Using Luxembourg data from the Eurosystem’s SPACE survey, the paper estimates four consumer payment types: 1% cash-only, 22% cash-preferring but also using digital payments, 28% digital-preferring but also using cash, and 49% exclusively digital. Cash-only users are generally women aged 45–75, more likely to report living in rural areas and less frequently participating in the labour market. Under the model, if merchants accept the CBDC, consumers who prefer digital payments would use it instead of cash, while adoption by other types varies with design choices. In a “debit cascade” scenario where the CBDC wallet replenishes automatically from a linked payment account, CBDC transactions are simulated at 24% of total payment value when top-ups are costless, falling to 5–15% if top-ups are costly and the wallet is capped at EUR 3,000. In a “credit cascade” scenario allowing automatic replenishment via credit (including the consumer’s credit cards), the CBDC share reaches 92% with costless replenishment and ranges between 16% and 48% when replenishment is costly and the wallet cap is EUR 3,000. The paper flags future work to extend the analysis to other euro area countries and to study CBDC demand as a store of value, and notes that the findings reflect the author’s views rather than those of the Central Bank of Luxembourg or the Eurosystem.