Should the Central Bank Issue E-Money?
28 Pages Posted: 23 Jan 2019 Last revised: 21 Feb 2019
Date Written: 2019-01-18
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