Can Central Bank Digital Currencies Promote the Internationalization of Currencies?

ABSTRACT Using multinational data (2000–2023), this study employed system GMM and fixed‐effects models to examine CBDC's impact on currency internationalization through a framework measuring ‘market acceptance’ and ‘policy drive.’ The results indicated that CBDC advancement significantly promotes currency internationalization. Proactive CBDC policies exerted a positive effect, yet high policy announcement frequency triggered negative repercussions. Mechanism tests confirmed CBDC facilitates currency internationalization through ‘market acceptance’ and ‘policy drive’ dimensions across financial and trade domains. Additionally, simultaneous development of retail and wholesale CBDC demonstrated enhanced effects. These findings provide valuable insights for central banks' differentiated CBDC development strategies and precise policy communication.