The Future of Digital Money

Debate Moderator(s):  Antonio Fatás, Stephen Cecchetti

Vox is launching an online debate on the future of digital money to foster a conversation among academics and policymakers about the costs and benefits of some of the innovations and future scenarios for digital money. Among the many open questions we hope to address with this debate are:

  • Is there a role for a global digital currency?
  • Will the use of private digital currencies (such as Libra) become widespread?
  • As legacy monies disappear, what will happen to the role of central banks in the payment systems?
  • How will financial institutions, in particular banks, evolve if these innovations become ubiquitous?
  • Will there be new channels for the transmission and amplification of economic and financial shocks both within and across borders?
  • How should we regulate tech companies that become large players in the payments system and financial markets?

Read the column by Steve Cecchetti and Antonio Fatás introducing the debate here.

Please note that commentaries are not accepted for this debate, please do not use the link below. Proposals for contributions in the form of lead commentaries should be sent to Antonio Fatas.

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Lead Commentaries

Jesús Fernández-Villaverde, Daniel Sanches, Linda Schilling, Harald Uhlig , 25 April 2020

The possibility and logistics of developing a central bank digital currency for the general public has attracted significant attention. Such an initiative would require central banks to be involved in financial intermediation and maturity transformation. This column explores the implications of such a venture by central banks using a classic banking model. With sufficient competition, a central bank digital currency can be beneficial and achieve the optimal allocation of funds. However, it also risks giving central banks excessive monopoly power, which could result in inferior outcomes.

Barry Eichengreen, Ganesh Viswanath-Natraj , 25 April 2020

Earlier this month the Libra Association issued a new White Paper updating its paper of June 2019.  This column argues that while the authors of the paper now understand that to succeed, their project must address economic and political concerns, they have done nothing to address worries about currency substitution.  A new proposed capital buffer is underspecified.  A key market in Libra futures or forwards is missing, as is a Libra lender of last resort.

Erik Feyen, Jon Frost, Harish Natarajan , 16 January 2020

Proposals for global stablecoins have put a welcome spotlight on deficiencies in financial inclusion and cross-border payments and remittances to emerging market and developing economies. This column, part of the Vox debate on digital currencies, argues however that stablecoin initiatives are no panacea. Moreover, they pose particular development, macroeconomic and cross-border challenges for emerging market and developing economies. It remains to be seen whether stablecoins can offer a decisive comparative advantage over fast-moving fintech innovations in these countries that are built on or improve the existing financial plumbing.

Luciano Somoza, Tammaro Terracciano , 03 December 2019

Policymakers are concerned about the stability of private digital currencies and protecting the consumers who use them. This column, part of VoxEU debate on the future of digital money, proposes locking stablecoins into an ETF-like structure with restrictions on basket composition. Stablecoin providers would be functionally similar to ETF sponsors, and stablecoins would become a new vehicle for traditional fiat currencies. 

Pierpaolo Benigno, Linda Schilling, Harald Uhlig , 03 October 2019

The governor of the Bank of England, Mark Carney, recently argued that more thought should be given to creating a global electronic currency. This column, part of the Vox debate on the future of digital money, looks at the challenges for the world economy of adopting a ‘world wide currency’, using a two-country world in which each country has its own national currency and national central bank, but where there is also a global currency in circulation. It suggests that Carney’s wish may be granted, but sooner than expected and in a different manner.  

Dirk Niepelt , 12 September 2019

Plans by Facebook and its partners to launch a global digital currency have the FinTech sphere buzzing with rumours, and regulators, central banks, and ‘old finance’ worried. This column, part of the Vox debate on the future of digital money, argues that while we may be witnessing a seismic shift in the monetary system, Libra’s role in that shift will be an indirect one. By taking the status quo option off the table, Libra or its next best replica will force monetary authorities and regulators to choose between central bank-managed digital currency and riskier private digital tokens.

Tobias Adrian, Tommaso Mancini-Griffoli , 09 September 2019

New entrants are vying to occupy the space once used by paper bills. This column, part of the VoxEU debate on the future of digital money, proposes a simple framework to make sense of who is attempting to pry our wallets open. It argues that the adoption of new digital means of payment could be rapid and bring significant benefits to customers and society, but that the risks must be tackled with innovative approaches and heightened collaboration across borders and sectors. One approach is for central banks to engage in a public–private partnership with fintech firms to provide a safe, liquid, and digital alternative to cash: synthetic central bank digital currency.

Barry Eichengreen , 04 September 2019

The repercussions and regulatory impact of Facebook’s proposed Libra currency are still unclear. This column, part of the VoxEU debate on the future of digital money, assesses the information as yet made available about Libra, including the implications for its exchangeability, scalability, privacy, and security. It is clear the design of the currency is yet to be finished, and many questions remain about its governance and structure.

Antonio Fatás, Beatrice Weder di Mauro , 30 August 2019

Economists have reacted negatively to the prospect of Facebook's Libra cryptocurrency. This column, part of the VoxEU debate on the future of digital money, outlines how if we focus exclusively on the efficiencies a currency like Libra brings to payment, there are arguments in its favour. A global digital currency provided by central banks may be preferable, but a private version would offer many of the same benefits.

Stephen Cecchetti, Kim Schoenholtz , 28 August 2019

On 18 June, Facebook announced plans to issue its own currency. By giving every individual with a smart phone the ability to purchase tokens in their own domestic currency, Libra would improve the efficiency of payments, reduce costs, and expand financial access—or so Facebook argues. This column, part of a VoxEU debate on the future of digital money, suggests the opposite: that Libra could facilitate criminal exploitation of the payments system while reducing the authorities’ ability to monitor and mitigate systemic risk. Financial regulators and central banks must act quickly and decisively to keep evolving financial technologies from threatening global financial stability.