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.
The Future of Digital Money
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.