Determinants of a Central Bank Digital Currency as a Payment System Platform: A Case of Zambia

Abstract

The study investigates how a CBDC payment system could enhance Zambia’s financial system efficiency and strengthen national defense against money laundering (AML) and counter‑terrorism financing (CFT). Methodology: Uses time‑series monthly data over eleven years. Applies unit root tests, cointegration tests, and ordinary least squares (OLS) regression to ensure statistical validity. Findings: CBDC adoption shows a significant relationship with payment system efficiency, AML/CFT defense, and equitable access to financial services. The high cost of currency processing is inversely related to CBDC adoption and found to be insignificant, likely due to the phased introduction alongside fiat currency. Model Insights: Demonstrates flexibility and applicability to other developing economies. Highlights motivations such as monetary sovereignty, policy transmission enhancement, and financial inclusion. In essence, the thesis concludes that a well‑implemented CBDC could contribute meaningfully to Zambia’s financial stability and inclusion goals while supporting broader economic resilience.