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The digitalization of money

Markus Brunnermeier, Harold James and Jean-Pierre Landau

No 941, BIS Working Papers from Bank for International Settlements

Abstract: The ongoing digital revolution may lead to a radical departure from the traditional model of monetary exchange. We may see an unbundling of the separate roles of money, creating fiercer competition among specialized currencies. On the other hand, digital currencies associated with large platform ecosystems may lead to a re-bundling of money in which payment services are packaged with an array of data services, encouraging differentiation but discouraging interoperability between platforms. Digital currencies may also cause an upheaval of the international monetary system: countries that are socially or digitally integrated with their neighbors may face digital dollarization, and the prevalence of systemically important platforms could lead to the emergence of digital currency areas that transcend national borders. Central bank digital currency (CBDC) ensures that public money remains a relevant unit of account.

Keywords: digital money; digital currency area; digital dollarization; currency competition (search for similar items in EconPapers)
JEL-codes: E42 E52 F33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-05
New Economics Papers: this item is included in nep-cwa, nep-mac, nep-mon and nep-pay
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