What Drives Money Competition: Comparative Advantage in Payments versus Reserves

We study competition between monies that provide separate payment and nonpayment (e.g., store-of-value) functions. Payment adoption is governed by comparative advantage across these two functions rather than by absolute payment superiority. A money that is too good as a store of value may circulate less even if it is technologically superior because agents prefer to hoard it. The model helps understand historical money competition and current debates over stablecoins and central bank digital currencies, showing that higher yields can weaken, rather than strengthen, the payment adoption of interest-bearing digital currencies and potentially allow traditional bank deposits to retain payment dominance.