The Impact of CBDCs on payment firms and banks

Abstract (work in progress): We empirically assess the effect of central bank digital currencies (CBDCs) on financial firms. We find that stock returns of payment firms react significantly and negatively to central bank announcements on the introduction of CBDCs. In contrast, bank stock returns do not react at all. These findings are consistent with CBDCs being primarily viewed as payment rails that jeopardize rents of payment firms. We substantiate this view by an in-depth analysis of central bank communication as well as analyst calls and annual reports of financial firms.