On the Programmability and Uniformity of Digital Currencies

Jonathan Chiu and Cyril Monnet

Staff Working Papers from Bank of Canada

Abstract: Central bankers argue that programmable digital currencies may compromise the uniformity of money. We explore this in a stylized model where programmable money arises endogenously, and differently programmed monies have varying liquidity. Programmability provides private value by easing commitment frictions but imposes social costs under informational frictions. Preserving uniformity is not necessarily socially beneficial. Banning programmable money lowers welfare when informational frictions are mild but improves it when commitment frictions are low. These insights suggest programmable money could be more beneficial on permissionless blockchains.

Keywords: Digital currencies and fintech; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: E50 E58 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2025-06
New Economics Papers: this item is included in nep-cba, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:25-18

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