Description
Abstract: Are private digital currencies such as Bitcoin a substitute for physical cash? We test this hypothesis using data from the Bank of Canada’s Bitcoin Omnibus Survey. We estimate the effect of Bitcoin ownership on the level of cash holdings. We find a positive correlation between Bitcoin ownership and cash holdings. This effect remains after accounting for selection into ownership. On average, Bitcoin owners hold 83 percent (in 2018) to 95 percent (in 2017) more cash than non-owners. Quantile regressions find that Bitcoin ownership has a non- linear effect on cash holdings. The difference varies from 63 percent (25th quantile) to 176 percent (95th quantile) in 2017. Our results provide evidence that Bitcoin adopters also hold cash.