Should the Central Bank Issue E-Money?

27 Pages Posted: 15 Nov 2018 Last revised: 11 Dec 2018

See all articles by Charles M. Kahn

Charles M. Kahn

University of Illinois, Urbana-Champaign; Feseral Reserve Bank of Saint Louis; Bank of Canada

Francisco Rivadeneyra

Bank of Canada

Russell Wong

Federal Reserve Banks - Federal Reserve Bank of Richmond

Multiple version iconThere are 2 versions of this paper

Date Written: October 23, 2018

Abstract

Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how the e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and central bank's existing liabilities like banknotes and reserves. The tradeoffs depend on i) the technological setup of the e-money system (as a token or an account; centralized or decentralized); ii) the potential improvement in the implementation and transmission of monetary policy; iii) the risks to safety and privacy from cyber attacks; and iv) the uncertain impact on banks efficiency and financial stability. The most compelling argument for central banks to issue e-money is to address competition problems in the banking sector.

Keywords: central bank digital currencies, e-money, cryptocurrencies, token- and account-based payment payments

JEL Classification: E42, E51, E58

Suggested Citation

Kahn, Charles M. and Rivadeneyra, Francisco and Wong, Russell, Should the Central Bank Issue E-Money? (October 23, 2018). Available at SSRN: https://ssrn.com/abstract=3271654 or http://dx.doi.org/10.2139/ssrn.3271654

Charles M. Kahn

University of Illinois, Urbana-Champaign ( email )

Department of Finance
340 Wohlers Hall
Champaign, IL 61820
United States

HOME PAGE: http://kahnfrance.com/cmk/

Feseral Reserve Bank of Saint Louis

411 Locust St
Saint Louis, MO 63011
United States

Bank of Canada

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Francisco Rivadeneyra (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

HOME PAGE: http://sites.google.com/site/rivadeneyr/research

Russell Wong

Federal Reserve Banks - Federal Reserve Bank of Richmond

P.O. Box 27622
Richmond, VA 23261
United States

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