Monetary Policy Implications of Stablecoins and CBDCs

Luca Beltrametti and Giovanni Battista Pittaluga
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Luca Beltrametti: Department of Economics, University of Genoa, Italy
Giovanni Battista Pittaluga: Department of Political Science, University of Genoa, Italy

Economia Internazionale / International Economics, 2023, vol. 76, issue 3, 453-478

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. Implicazioni di politica monetaria circa le stablecoin e le CBDC Ripercorriamo brevemente il panorama delle criptovalute e discutiamo l'innovazione delle monete digitali nel quadro teorico del dibattito “metallista” vs “cartellista”. Discutiamo la questione del trade-off tra elasticità dell’offerta di moneta e fiducia nella stabilità degli stablecoins. Ci chiediamo poi se le monete stabili possano diventare moneta pubblica e ci concentriamo sulle implicazioni di politica monetaria degli stablecoins e delle Central Bank Digital Currencies, concludendo che le valute digitali condividono alcuni degli svantaggi sia della commodity money che della fiat currency. Le monete stabili potrebbero diventare un mezzo di pagamento diffuso abbassando così i costi delle transazioni, ma riducendo significativamente la capacità delle banche centrali di controllare l'offerta di moneta, e quindi l'efficacia della politica monetaria. Concludiamo che le CBDC dovrebbero essere abbastanza buone da marginalizzare le valute digitali private, ma non abbastanza da disintermediare completamente i depositi delle banche commerciali.

Keywords: Monetary Policy; Stablecoins; Digital Money; CBDC (search for similar items in EconPapers)
JEL-codes: E40 E42 E51 E58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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