CONSUMERS’ PERCEIVED BENEFITS AND THREATS OF

THE DIGITIZATION OF CURRENCY

Andres Sanchez – Student ID 302099

Maastricht School of Management
MBA 32

Supervised by Vincent Feltkamp

1. Rationale of the study

The digitization of money, understood as the growing trend for a non-physical currency,
promises to be the next big revolution of the internet era. Today bills and coins represent 7%
of the money in circulation in the United States and just 3% in Sweden, while in Kenya, 73%
of adults are using mobile money (Todd, 2012). The process of digitization is being
simultaneously driven by the interests of different actors of the economy: Governments are
demanding more and better structures to control tax evasion and money laundering (OECD,
2002); central banks want to benefit from reducing its costs in providing currency (Moody’s
Analytics, 2016) and having more control over monetary tools like negative interest rates in
order to react to ultra-low inflation or deflationary environments (Sands, 2016); commercial
banks expect to have access to almost 2.5 billion working-age people who currently have no
access to formal financial services (Sandeep, et al., 2014); businesses would like to cut the
costs of handling cash (Moody’s Analytics, 2016); and consumers want better access to credit
and other financial services in a faster, more convenient, and more accessible way (Sandeep,
et al., 2014).

According to Sandeep, et al. (2014), digital currency adoption could enable as many as 220
million to enter the formal financial sector. This could result in over one trillion dollars
moving from the informal to the formal economy, lowering newcomers’ annual financing
costs in nearly $US600 per capita (which for many is a substantial amount), increasing
governments collections in $US~100 billion, raising companies efficiency in $US~340
billion, and increasing bank deposits in $US~80-$100 billion and loans in $US~70-90 billion.

There are hundreds of initiatives taking place all over world and still a lot to learn about
digital currencies in terms of what is possible and desirable for our societies. One of the most
remarkable examples is Bitcoin and its key technology ‘Block Chain’, with which now
possible to save digital money in absence of a bank; transfer money directly from one user
to another without any intermediary; secure a digital payment system by decentralizing
instead of centralizing the information; and have alternatives to maintain the anonymity
during transactions, emulating the benefits of cash (Ali, Barrdear, Clews, & Southgate, The
economics of digital currencies., 2014). Nevertheless, the system has been widely criticized
in terms of security, price volatility and sustainability (Zohar, 2015).
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Bitcoin provides just one example of the multiple configurations and characteristics that
digital currencies can have. Some of the currencies operating in the market are privately-
owned, while others are public or independent (no claimed ownership); some are backed with
government’s currency, while others rely on their own; some run on centralized structures,
while others do in a decentralized ones; and some of them have even replicated some of the
benefits of cash, making it possible to preserve privacy during online transactions.

In spite of the recognized benefits, any given digital currency would hardly satisfy
everybody’s interests. Digital currencies, just like the physical ones, can be highly
“customized” depending on the context and the particular needs of stakeholders. Banks' and
governments’ vision, for example, could lead to a centralized-cashless structure that
enhances control, but could stimulate power abuses, loss of privacy, and the appearance of a
“visible hand” ruling the economy, among other effects. Consumer’s vision, on the other
hand, could lead to a decentralized structure that prioritizes freedom and low costs, but could
eventually derive into abuses to the system, proliferation of illegal activities, and
inefficiencies associated with information asymmetries (Aaken, Ostermaier, & Picot, 2014),
among others.

With so diverse intentions, the secret formula for balancing the interests of all stakeholders
might not exist. But as the digitization trend continues to deepen into our economy, it
becomes increasingly important to decide within what is technologically possible and
desirable for our societies when it comes to designing an inclusive and comprehensive
monetary and financial system. As a consequence, it is not only necessary to set clear policies
and regulations to ensure that digital currencies would deliver value to the different
stakeholders, but also to establish clear rules in order to avoid abuses from any party.
Especially, because the difference of interest between the parties could be a potential source
of conflicts of interest and agency problems.

Of special concern in this point, given the power of banks and governments over the current
monetary and financial systems, is the debate between security, efficiency and privacy. Is it
worth to sacrifice privacy in exchange for security and/or efficiency?

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2. Problem statement

Digitization of money is apparently occurring in two opposite poles: a centralized system led
by governments and banks, which is built under the premises of financial inclusion and
control; and a decentralized system led by innovative consumers and businesses, which is
built under the premises of efficiency and freedom. This thesis seeks to understand the
potential of digital currencies under the view of the different actors of the economy and draw
a framework of benefits and threats of the different approaches. With consumers as one of
the most important stakeholders, the main focus of this thesis would be to answer the
following major research question:

What are the perceived benefits and threats for consumers in the process of digitization of
currency?

Minor research questions:

I. How could digital currencies and the digitization of money impact the way
governments and banks lead the monetary and financial systems?
II. What could be the benefits and challenges of moving to a cashless economy?
III. What are the interests of the different stakeholders (governments, central banks,
commercial banks, businesses and individuals) in the digitization of currencies?

3. Literature review

Definition of digital currency and its characteristics

There is little or no consensus in the literature about the definition of digital currency, which
is also referred almost indistinctly as digital money (Dorn, 1997) (OECD, 2002) (Todd, 2012)
(Sandeep, et al., 2014) (Lazzolino & Wasike, 2015) (Zohar, 2015), electronic money (OECD,
2002) (Mbiti & Weil, 2013), electronic currency (Todd, 2012), electronic cash (Lian, Chen,
& Li, 2014), virtual money (OECD, 2002) (Todd, 2012), and virtual currency (Böhme,
Christin, Edelman, & Moore, 2015), among others.

Yet, a more generalized agreement is found regarding the characteristics or functions of

currency, whether it is physical or digital. From the perspective of economic theory, a digital
currency can be considered to be money to the extent that it serves as a medium of exchange

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with which to make payments; a store of value with which to transfer 'purchasing power’ (the
ability to buy goods and services) from today to some future date; and a unit of account with
which to measure the value of any particular item for sale (Ali, Barrdear, & Clews,
Innovations in payment technologies and the emergence of digital currencies., 2014, p. 264).

Based on the above mentioned, for this paper purposes digital currency would be defined as
credit/debit cards, stored-value schemes and other non-paper based value transfer
mechanisms (Sandeep, et al., 2014, p. 6), as it provides a simple and comprehensive way of
understanding the concept. Under this umbrella, not only traditional banking products such
as credit and debit cards are considered to be digital currencies, but also public digital
currencies such as Mintchip, private mobile payment solutions like M-Pesa, and
independent-decentralized cryptocurrencies such as Bitcoin, all of which would be
introduced later in the current chapter.

Digital currencies, just like the physical ones, can be highly “customized” in order to
highlight certain characteristics of the currency or attend particular needs of any given
stakeholder. Ali, Barrdear, & Clews, Innovations in payment technologies and the emergence
of digital currencies, (2014, p. 264), identify four major types of innovations that can be used
as a form of classification of the current digital currencies.

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Figure 1. Ali, Barrdear, & Clews (2014) categorization of digital currencies

Source: (Ali, Barrdear, & Clews, Innovations in payment technologies and the emergence of
digital currencies., 2014).

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With a different approach, Greene & Shy (2014) contrast diverse features of the government
backed digital currencies and the not government backed digital currencies, in terms of
acceptance, security (theft, loss, consumer protection, and privacy), convenience and costs.

Table 1. Greene & Shy (2014) comparison of selected characteristics of currencies

Government Not government
Cash backed digital backed digital
currencies currencies
Anonymous - no one knows that you have received it or spent it   
If you lose it, it is gone   
No transaction fees   For now
Immediate and irrevocable settlement   
You can use it in the real world   Sometimes
You can hold it in your hand (physical aspect)   Possibly
It has government backing   No
It is widely accepted  n/a No
Tied to a national currency   No
You can use it online No  

Source: Adapted from (Greene & Shy, 2014)

Both classifications are only an example of the wide range of the possibilities that bring
digital currencies. After all, nowadays technology not only allow us to think in the feasibility
of spreading digital currencies, but also on the opportunity of customizing them. We can now
decide on different structures, ownership systems, privacy settings and even choose between
whether allowing or not the use of “digital cash” for preserving the anonymity during online
transactions.

Digital currencies and ownership possibilities

There are several examples in the market about public, private, and independent (no claimed
ownership) digital currencies.

Ecuador hosts the first-ever state-run electronic payment system (Rosenfeld, 2015). Owned
and administrated by the Central Bank of Ecuador (BCE), Sistema de Dinero Electrónico
(Electronic Money System) is an SMS-based mobile phone service that enable users to
deposit, withdraw, transfer from one user to another, and make payment to participating
establishments. As the BCE does not have a retail presence, around 200 “transaction points"
and 75 “macro-agents"—from financial institutions to public and private enterprises- will
facilitate transaction activities while also receiving a fee (The Business Year, 2015). While
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Sistema de Dinero Electrónico was in principle is designed to support the country’s dollar-
based monetary system, many claim that it could allow the government to issue new money
that isn't directly tied to its U.S. dollar reserves (Rosenfeld, 2015).

In Canada, the state-owned Royal Canadian Mint experimented since 2012 with Mintchip
before selling it in early 2016 to a local private player. The digital payments platform, which
is tied to the Canadian Dollar, mainly reflected the interest of the Government to better
understanding the possibilities of digital currencies and online payment systems (CBC News,
2016). Unlike credit or debit, no third party is involved and no personal information is used
in the transaction. Instead, the transfer has the ID of the chip receiving the funds, the date,
and the amount being sent (Karstens-Smith, 2014).

Just like public initiatives, there are several private digital currencies with varied
characteristics. M-Pesa, by Vodafone, Safaricom and Vodacom, is massively used in Kenia,
Tanzania, South Africa, Afghanistan, India and other markets. This mobile payment system
was initially developed to facilitate local and national remittances of urban migrants, but has
gradually evolved into a platform for making payments, storing value and paying for utilities
(Lazzolino & Wasike, 2015, p. 231) without needing a bank. To transfer funds, people go to
an M-Pesa outlet that loads money onto their phones. Afterwards, people pay their bills, make
purchases, or give money to others by sending a text message. Finally, the recipient of the
text brings the phone to the nearest M-Pesa vendor to collect cash (Todd, 2012, p. 3).

In Greece, TEM is one of the larger and more spread alternative payment systems (Roberts,
2015). Founded by a cooperative in the city of Volos soon after the Greek debt and liquidity
crisis busted, the system allows people to use TEM Units in order to exchange local products,
goods and services, with an exchange rate that is pared to Euro (Rogojanu & Badea, 2014).
TEM has nearly 1,000 registered users and dozens of participating local businesses, which
ranges from prepared foods to doctor visits (Roberts, 2015).

Another example of private currency is found in the game Second Life. Created by Linden
Labs, Linden dollars can be purchased in the game with US dollars. Users can earn, spend
and store Linden dollars by their actions in the game. Later, users can visit independent
exchanges to convert Linden dollars into government-denominated currencies like US dollars

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(Greene & Shy, 2014, p. 278). According to Lillington (2015), only in 2014 $60 million
worth of virtual reality goods were sold within Second Life.

A third group of “ownership” is found in digital currencies such as Bitcoin and Ripple. None
of these currencies have an owner, nor have a central entity to control their operations.
Bitcoin has particularly attracted the attention of media and academy. The currency and
payment system is an open-source protocol based on peer-to-peer (P2P) technologies, which
is maintained by a large number of developers, most of them volunteers (Zohar, 2015, p.
104). Some of its key features are:

 Bitcoin is based on a decentralized protocol, which means that there is no organization

or government in control of its operation. As a consequence, there is no central entity
able to apply monetary policy (Zohar, 2015, p. 105).
 The amount of Bitcoin is limited to 21 million, which prevents a government or monetary
authority from inflating the currency (Angel & McCabe, 2015, p. 606).
 Payments can be made directly between user without the use of any intermediaries (such
as commercial banks) (Ali, Barrdear, Clews, & Southgate, The economics of digital
currencies., 2014, p. 277). Transactions are effectively irreversible once they are
committed (Zohar, 2015, p. 104).
 The currency is not backed by any government, central bank or physical asset, which
means that it has value only to the extent that participants agree that it has (Todd, 2012);
 Currently is possible to hold and transfer money in the system with extremely low fees
(Zohar, 2015).
 All Bitcoin transactions are public and it is possible to trace all the transactions made
since the inception of the system. However, the system do not require users to disclose
which holdings of digital currency they control, thereby approaching the anonymity of
banknotes or electronic payments (Ali, Barrdear, Clews, & Southgate, The economics of
digital currencies., 2014, p. 277).

The Block Chain: The distributed ledger

Bitcoin’s success as a digital currency is commonly attributable to its main feature and key
innovation, the Block Chain (Zohar, 2015), which allows the currency to be used in a

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decentralized payment system (Ali, Barrdear, Clews, & Southgate, The economics of digital
currencies., 2014).

As its name suggests, the Block Chain group together blocks of approved transactions in an
incremental log, making it possible to verify every transaction that have ever occurred since
the inception of the system. This is because each block contains the cryptographic hash of its
predecessor, which also serves as a unique identifier of the previous block. (Zohar, 2015, p.
107).

The Block Chain works, in a simplified way, as Figure 2 shows. After two parties approve a
transaction, it is disseminated across the network to all the users of the system (peer-to-peer
network). Every new transaction that is published to the Bitcoin network is periodically
grouped together in a block of recent transactions, where special users in the network, known
as ‘miners', compete to verify them (Ali, Barrdear, Clews, & Southgate, The economics of
digital currencies., 2014). As the block itself is compared to the most recently published block
to make sure no unauthorized transactions have been inserted, there is only one solution to
the new Block Chain (Böhme, Christin, Edelman, & Moore, 2015).

Figure 2. How does Bitcoin and the Block Chain work

Source: (Böhme, Christin, Edelman, & Moore, 2015)

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It is important to notice that although Bitcoin introduced a new currency and a new payment
technology together, the distributed ledger technology could, in theory, be used without the
creation of a new currency (Ali, Barrdear, & Clews, Innovations in payment technologies
and the emergence of digital currencies, 2014, p. 264).

The growing trend of the digitization of money

According to the OECD (Organization for Economic Co-operation and Development),

“money’s destiny is to become digital” (2002, p. 7). Today bills and coins represent 7% of
the money in circulation in the United States and just 3% in Sweden, while in Kenya, 73%
of adults are using mobile money (Todd, 2012).

Sweden is one of the leading economies in terms of currency’s digitization. Mainly driven
by a cutting-edge technologies and digitalized banking and corporate sectors, the country is
on its way to become a cashless economy. Physical currency makes up just 3 percent of the
money in circulation (Todd, 2012), and the average value of Swedish banknotes in circulation
has declined by almost 25% since 2011 (Black, 2016). Nowadays most of Swedish pubs do
not accept cash, many Swedish citizens purchase public bus tickets via text messages, and a
growing number of businesses and banks are following the trend (Todd, 2012, p. 3).

Just as in Sweden, the profound impacts of digital currencies are just beginning to make their
presence in the global economy. The use of internet and mobile technologies are shaping the
way people live and work (Sandeep, et al., 2014).

The digitization trending is not only coming from new initiatives in terms of new electronic
payment systems or new currencies, but also from the existing ones. Different central banks
across the globe, including the European Central Bank (ECB), are seriously thinking about
eliminating large notes in what they say is an effort to fight against criminal activity (Petroff,
2016). The 500 euro note, alone, represents 29 percent of the value of all banknotes (nearly
306 billion euros), thus a change would be a major intervention in money supply. To date
there is no clarity on how the value would be replaced (Black, 2016).

A recent study by Sands (2016), concluded that eliminating high denomination notes, such
as the €500 note, the $100 bill, the CHF1.000 note and the £50 note, could have a positive
effect in controlling tax evasion, financial crime, terrorist finance and corruption. By

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eliminating high denomination notes life would be simply harder for those pursuing criminal
activities.

However, this is not the only benefit that he sees on cutting the large notes. In his study he
also concludes that eliminating them would be beneficial for Central Banks to facilitate the
application of monetary policies such as negative interest rates. As he states, “negative
interest rates cannot be imposed on cash. Introducing negative interest rates would create a
powerful incentive to hold deposits in cash, most likely in higher denominations. Eliminating
high denomination notes, so that saving in cash was more inconvenient would mitigate this
problem.” (Sands, 2016, p. 53).

Digitization readiness

Sandeep, et al. (2014) developed the Digital Money Readiness Index, in which they measure
and classify different economies on how ready they are to adopt digital money. For doing so,
they created 15 indicators in 4 pillars: institutional environment, enabling infrastructure,
solution provisioning and propensity to adopt.

After measured, countries are classified in 4 stages: incipient, emerging, in-transition and
materially ready. Results of the index show that emerging economies are located mostly in
the ‘incipient’ and ‘emerging’ stages, while most of the developed countries (particularly
OECD countries) are ‘in transition’ or ‘materially ready’ for adopting a digital currencies.

Greene & Shy (2014) also identify that young people is more receptive to using digital money
than older people, and that it is likely that, as time passes, more people will become
comfortable with the idea of digital money.

Benefits of digitization of money to governments

Digital money holds the promise of several benefits for Government including financial
inclusion and its broader social and economic advantages, but also efficiencies and cost
savings in government disbursements. Governments can also benefit with improvements in
control over tax evasion and money laundering (Sandeep, et al., 2014, p. 21), especially in
the case of a cashless economy.

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Benefits of digitization of money to business
Since the potential applications are, in principle, broader than just payments, the distributed
ledger technology may perhaps be better described as a first attempt at an ‘internet of finance',
bringing new opportunities for disruptive innovation. Digital money adoption also provides
the opportunity for efficiency gains in terms of the reduced costs of handling cash (theft,
transit, security costs), and new revenue upside due to higher spending from existing
consumers and access to new consumers.

Benefits of digitization of money to central banks

A digital-cashless economy would facilitate the use of monetary policies such as negative
interest rates, and would allow a better control over massive, uncontrolled flows of capital
during financial crises.

Benefits of digitization of money to commercial banks

Digital money adoption provides the opportunity for efficiency gains in terms of the reduced
costs of handling cash along with new revenue upside due to higher spending from existing
consumers and access to new consumers. The cost of cash is a result of theft, transit, and
security costs (Sandeep, et al., 2014, p. 21-22). In addition, when moving to a cashless
economy the amount of resources moved through the financial system would necessarily
increase.

Benefits of digitization of money to commercial banks

Digital money adoption provides the opportunity for efficiency gains in terms of the reduced
costs of handling cash along with new revenue upside due to higher spending from existing
consumers and access to new consumers. The cost of cash is a result of theft, transit, and
security costs (Sandeep, et al., 2014, p. 21-22). In addition, when moving to a cashless
economy the amount of resources moved through the financial system would necessarily
increase.

Benefits of digitization of money to consumers

Many individuals in the informal economy have to pay high rates for credit; they lack safe
means of savings and investment and many face security concerns in handling cash (Sandeep,

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et al., 2014, p. 24). Advocates of digital currencies also argue that users can enjoy lower
transaction fees on payments than existing retail payment systems or international transfers
(Ali, Barrdear, & Clews, Innovations in payment technologies and the emergence of digital
currencies., 2014, p. 267).

Different studies have approached to consumers benefits with the digitization of money,
including (Ali, Barrdear, & Clews, Innovations in payment technologies and the emergence
of digital currencies., 2014) (Greene & Shy, 2014) (Moody’s Analytics, 2016) (Sandeep, et
al., 2014) (Todd, 2012), among others. Nevertheless, none of them have directly focused on
consumers and analyzed their perception on the benefits (and threats) of the digitization of
money. Consequently, most of what they expose in their studies about consumers benefits is
based on secondary data or common sense.

Conceptual model

A review of the above literature has helped to develop the following conceptual model, given
that different authors have used similar approaches. For example, Ali, Barrdear, Clews, &
Southgate, The economics of digital currencies (2014) explored the risks that digital
currencies may pose to the Bank of England's objectives for monetary and financial stability;
Ali, Barrdear, Clews, & Southgate, Innovations in payment technologies and the emergence
of digital currencies (2014) explored how the new innovations in payment technologies can
impact the economic and financial system; Lazzolino & Wasike (2015) examined the factors
that make cash ‘sticky’ in the increasingly digitized Kenyan financial landscapes; and
Sandeep, et al. (2014) studied the factors that affect the outcome of a digital money initiative.
However, even if similar, none of the articles referenced in this proposal have directly
focused on consumers’ perceived benefits and threats of the digitization of money.

As it was exposed in the literature review chapter, digital currencies can adopt different
characteristics in terms of structure, ownership, privacy, among others. Therefore, with the
intention of maintaining the focus of the study on certain types of digital currencies, it was
decided to concentrate on those that operate on centralized structures and cashless systems.

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As a result, the following model shows the relationship between the digitization of currency
in a centralized structure and cashless system, as the independent variables, and the
consumers’ perceived benefits and threats as the dependent variables.

Digitization of Currency

Centralized structure
Consumers’ perceived
benefits and threats
Cashless system

4. Methodology

4.1 Research strategy

This thesis seeks to understand consumers’ perceived benefits and threats with the
digitization of money. According to Blumberg, Cooper, & Schindler (2011) an explanatory
research focus would be appropriate in order to explain the relationship between the
independent variable, which is the digitization of money, and the dependent variables, which
are consumers’ perceived benefits and threats, and also attempt to explain the reasons of the
phenomena.

This study is also aimed to learn about opinions and attitudes of current and potential
consumers of digital currencies, so a survey for collecting primary data is considered the
most appropriate (Blumberg, Cooper, & Schindler, 2011, p. 207).

4.2 Population

There are several populations that could be interesting for conducting this study. However,
inspired on Greene & Shy (2014) and Sandeep, et al., (2014) findings, it was considered of
particular interest to focus on a population which according to them is more prepared for
adopting digital currencies than others: young people in OECD countries.

This population is considered to be attractive, as the main goal of this research is to explore
consumers’ perceived benefits and threats that might affect the digitization of currency. With
this on mind, this research would focus more on the psychological, sociological or cultural

15
factors that would benefit or threat the adoption of digital money, than on other influencing
factors such as infrastructure or public policy. As this is a population that has better external
conditions for adopting digital currencies, it would be easier to focus on the internal
conditions.

As a result, the population of this study would be defined as the Millennials (people born
from the early 1980s to the early 2000s) who are nationals from OECD countries. According
to the data OECD (2016), in 2013 there were nearly 336.1 million people between 15-34
years old in OECD countries.

4.3 Sample size

If calculated as a population proportion, the minimum sample size for this study, with a 95%
confidence level and a 5% margin of error, would be 384 consumers. As non-pilot test have
been ran yet, a 50% sample proportion was used for the calculation (Saunders, Lewis, &
Thornhill (2009, p. 581)

4.4 Sampling technique

As the main purpose of this study is to gain ideas about the consumers of digital currencies,
in a cheap and easy way, convenience sampling has been selected (Blumberg, Cooper, &
Schindler, 2011).

4.5 Data collection

Primary data will be collected through self-administered questionnaires in mainly but not
exclusively in the city of Maastricht, the Netherlands. Due the large size of the sample, it is
considered important to design a short questionnaire of no more than 20 questions to be filled
in less than 5 minutes.

4.6 Type of data

This study will consist of primary and secondary data. Primary data will be gathered from
the survey in order to answer the major research question (Blumberg, Cooper, & Schindler,
2011). Secondary data, on the other hand, will consist on related studies done by others in
the past and/or for different purposes (Blumberg, Cooper, & Schindler, 2011), and would be
mainly used to build a framework for analyzing digital currencies, its benefits and threats for

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the different stakeholders in the economy, and support the answer of the minor research
questions stated in the first pages of the proposal.

4.7 Measurement instrument

Primary data will be collected using a survey. The questionnaire will consist of demographic
data and closed-ended questions, most of them multiple-response questions. Demographic
data about the surveyed will be recorded first and the closed-ended questions after. Answers
for the closed-ended questionnaire will be recorded using the multiple-choice single-response
scales, multiple-choice multiple-response scales, Likert scales, and a multiple rating list
scales.

The questionnaire would be designed in a practical way, so economy, convenience and

interpretability is prioritized (Blumberg, Cooper, & Schindler, 2011).

4.8 Data processing and analysis

The analysis will consist of descriptive statistics to understand the characteristics of the
variables studied. Relationship between variables would be assed using correlations (for
example between previous experiences with digital currencies and perceived benefits and
threats of the digitization of money), and multiple linear-regression to test the relationship
between the dependent variable and the independent variables. The data collected will be
analyzed using Microsoft Excel and Stata (if required).

4.9 Validity and reliability

A pilot test will be conducted in order to detect weaknesses in the design and instrumentation
of the questionnaire. A Cronbach’s alpha analysis would also be used to determine the
internal consistency of the variables (Blumberg, Cooper, & Schindler, 2011).

4.10Feasibility of the study

The study will be conducted in Maastricht, the Netherlands, which is a city known for hosting
thousands of international students and professors. This is of particular interest for the study,
as it would be benefited from a richer sample of people coming from different countries and
backgrounds.

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4.11Researcher reflexivity

Initial research shows that it is important to build an appropriate framework for the concept
of digital currency, especially because authors like Sandeep, et al. (2014) provide a wider
definition of digital currency than others like Greene & Shy (2014). In terms of the survey,
it would be challenging to design a short, clear and simple questionnaire, as some of the
concepts could be easily misunderstood if they are not correctly introduced.

4.12Ethics

Confidentiality of the responses will be assured by not asking the names of the respondents.
Data will be presented through coding. Surveyed would also have the right to refuse to
participate in the survey.

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Ali, R., Barrdear, J., & Clews, R. (2014). Innovations in payment technologies and the emergence of
digital currencies. Bank Of England Quarterly Bulletin, 54(3), 262 - 275.

Ali, R., Barrdear, J., Clews, R., & Southgate, J. (2014). The economics of digital currencies. Bank of
England Quarterly Bulletin, 54(3), 276-286.

Angel, J. J., & McCabe, D. (2015). The Ethics of Payments: Paper, Plastic, or Bitcoin? Journal Of
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Black, J. (2016, Feb 26). Europe's Banknote Furor Becomes Front Line on Future of Cash. Retrieved
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Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, Technology, and
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CBC News. (2016, Jan 13). Royal Canadian Mint sells Mintchip digital payments platform to
Toronto's nanoPay. Retrieved Mar 14, 2016, from CBC News:
http://www.cbc.ca/news/technology/mintchip-nanopay-1.3402059

Dorn, J. A. (1997). The Future of Money in the Information Age. Washington D.C.: CATO Institute.

Gill, N. (2015, May 28). Ecuador Requiring Banks to Offer Electronic Currency Services. Retrieved
Mar 15, 2016, from Bloomberg: http://www.bloomberg.com/news/articles/2015-05-
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Appendix A: Questionnaire

My name is Andres Sanchez. I am an MBA candidate at Maastricht School of Management. I am

writing my final thesis about consumers’ perceived benefits and threats with the digitization of
money.

The reason for the study is entirely academic and serves as a final requirement for the MBA degree.
I am kindly inviting you to participate in this research study, which will take about 5 minutes of your
time. All the responses will be recorded anonymously and the results will be confidential.

Thank you in advance for your cooperation.

Demographics

1) Gender Female Male

2) Age 15-24 25-34 35-44 45-54 55-64 Over 65

3) Country

4) Anual Expenditures Less than € 20,000 € 20,000- €40,000 € 40,000- €60,000 More than €60,000

5) Level of Education No Education High school graduate University

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Perceived benefits and threats of digital currencies

According to the OECD (Organization for Economic Co-operation and Development), “money’s
destiny is to become digital” (2002, p. 7).

6) Which of the following digital payment systems and/or digital currencies have you ever used?
Please check all the digital payment systems and or digital currencies that you have ever used

Non-official local currencies (like Bristol

Pound) or credits exchangeable for
Credit/debit cards
official government currencies (like
Linden Dollars in the game Second Life)

Digital currencies (Such as Bitcoin, Ripple,

Online banking (web portals and apps)
Guldencoin, Litecoin, Peercoin, etc.)

Mobile Money - Mobile systems that

Mobile payment systems (Such as Paypal,
have their own credits or currencies-
Apple Pay, Google Wallet, Samsung Pay, etc.)
(Such as M-Pesa, Dinero Electronico)

Almost all time Never

7) To what extent do you use cash (physycal money) in your daily life? 5 4 3 2 1

8) Please indicate to what extent do you agree or disagree with the following statements about digital money.

Digital money, when compared to cash,

Strongle agree Strongly disagree

Its a more secure way of carrying money with me 5 4 3 2 1
Its a more secure way for saving money 5 4 3 2 1
Its a more secure mean for making transactions 5 4 3 2 1
Its a cheaper way for saving money 5 4 3 2 1
Its a cheaper way for making transactions 5 4 3 2 1
Its a faster way for making transactions 5 4 3 2 1
Its more helpfull for tracking the amount I spend 5 4 3 2 1

9) Please indicate to what extent do you agree or disagree with the following statements about cash.

Strongle agree Strongly disagree

Cash is old-fashioned 5 4 3 2 1
Cash is only necessary for the places where they don't receive other means of payment5 4 3 2 1
Cash is only useful for small payments 5 4 3 2 1
Cash is easier to use than cards or any other form of digital currency 5 4 3 2 1
Costs are important to me. Holding cash doesn't cost me, while holding digital money does
5 4 3 2 1
I like the privacy/anonymity that cash provides me 5 4 3 2 1
I feel safer with having physical money than with digital money 5 4 3 2 1

10) To what extent do you agree or disagree with the following statemets:

Indifferent /
Security hard to decide Anonimity
The anonymity that cash provides plays a key role in tax evasion, financial
crime, terrorist finance and corruption. Would you agree to trade the 7 6 5 4 3 2 1
privacy that cash offers you for a more secure environment?
Indifferent /
Strongle agree hard to decide Strongly disagree
Resources in cash are out of the financial system. If cash wouldn't exist, it
would be easier for governments and banks to promote financial inclusion
for the most vulnerable, and society in general would be benefited with
7 6 5 4 3 2 1
lower costs of borrowing money, making transactions, etc. Would you agree
to have all your money digitized so global financial inclusion can be
reached?

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 Appendix B: Draft Theory Chapter

1. Definition of digital currency and its characteristics

a. What are digital currencies?
b. Characterization of digital currencies
2. Digital currencies initiatives: what can we learn? What is it possible to do?
a. Public initiatives
b. Private initiatives
c. Independent initiatives (no claimed ownership)
3. The growing trend of the digitization of money
a. History and evolution of digital currencies
4. Benefits and threats of digitization of money
a. to individuals
b. to governments
c. to business
d. to central banks
e. to commercial banks
5. Cash: definition and its role in society
6. Trading privacy for security and/or efficiency: Is it worth? Is it necessary?
7. The financial system’s role in a digitized monetary system: major opportunities and
challenges
a. Would it be favored or challenged commercial banks role as intermediaries?

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