Decentralized Banking: Monetary Technocracy in the Digital Age

Tenth Mediterranean Conference on Information Systems (MCIS), Paphos, Cyprus, September 2016

15 Pages Posted: 12 Jul 2016 Last revised: 21 Jul 2016

See all articles by Adam Hayes

Adam Hayes

University of Wisconsin - Madison - Department of Sociology; The New School - Department of Economics

Date Written: June 11, 2016

Abstract

Bitcoin has ushered in the age of blockchain-based digital currency systems. Secured by cryptography and computing power, and distributed across a decentralized network of anonymous nodes, these novel systems could potentially disrupt the way that monetary policy is administered – moving away from today’s human-fallible central bankers and towards a technocratic, rules-based algorithmic approach. It can be argued that modern central banks have failed to stem macro-economic crises, and may have, in fact, exacerbated negative outcomes by incentivizing excessive risk-taking and moral hazard via unconventional monetary tools such as quantitative easing and negative interest rates. A central bank typically serves three primary functions: to issue and regulate the supply of money; to serve as clearinghouse for settlement of payments transactions; and to serve as lender of last resort. Could a digital currency system serve as a rational substitute for a central bank? This perspective paper examines that question, and then suggests that indeed it could be plausible. While Bitcoin in its current form will prove to be inadequate to function as monetary authority, I put forward what an operative case could resemble.

Keywords: Bitcoin, Digital currency, Blockchain, Monetary policy, Central banking

Suggested Citation

Hayes, Adam, Decentralized Banking: Monetary Technocracy in the Digital Age (June 11, 2016). Tenth Mediterranean Conference on Information Systems (MCIS), Paphos, Cyprus, September 2016. Available at SSRN: https://ssrn.com/abstract=2807476

Adam Hayes (Contact Author)

University of Wisconsin - Madison - Department of Sociology ( email )

8128 William H. Sewell Social Sciences Building
1180 Observatory Drive
Madison, WI 53706
United States

The New School - Department of Economics ( email )

Room 1116
6 East 16th Street
New York, NY 10003
United States

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