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Corresponding Author:
Luca Beltrametti, Department of Economics, University of Genoa, Italy

Coauthors:
Giovanni Battista Pittaluga, Department of Political Science, University of Genoa, Italy

Monetary Policy Implications of Stablecoins and CBDCs

Volume 76 - Issue 3 - The Evolving Cryptoecosystem: Implications for the Financial Services Markets, August 2023
(pp. 453-478)
JEL classification: E40; E42; E51; E58
Keywords: Monetary Policy; Stablecoins; Digital Money; CBDC

Abstract

We briefly overview the cryptocurrencies panorama in the light of recent technological innovations and discuss contemporary innovation in digital monies in the theoretical framework of the “metallist” vs “cartelist” debate on the origin of money. We discuss the issue of the trade-off between elasticity of money supply and confidence in the stability of stablecoins building on the literature on private currencies of the past. We then ask whether stable coins can become public money and focus on the monetary policy implications of stablecoins and Central Bank Digital Currency (CBDC) and conclude that digital currencies, despite their many advantages, share some of the disadvantages of both commodity money and fiat currency. Stablecoins, if properly regulated, could become a widespread means of payment: while this would help lower transaction costs, it could significantly reduce the ability of central banks to control the money supply, and thus the effectiveness of monetary policy. The issuance of CBDCs may have non-negligible economic costs (in particular, disintermediation of commercial banks) and political risks (privacy concerns). We conclude that CBDCs should be good enough to marginalise private digital currencies, but not good enough to fully disintermediate the deposits of the commercial banks.

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Monetary Policy Implications of Stablecoins and CBDCs

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Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce