Should the Central Bank Issue E-Money?

Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes 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: Suggested Citation

Kahn, Charles M. and Rivadeneyra, Francisco and Wong, Tsz-Nga, Should the Central Bank Issue E-Money? (January, 2019). FRB St. Louis Working Paper No. 2019-3, Available at SSRN: https://ssrn.com/abstract=3318871 or http://dx.doi.org/doi.org/10.20955/wp.2019.003