Should the Central Bank Issue E-Money?

28 Pages Posted: 23 Jan 2019 Last revised: 21 Feb 2019

See all articles by Charles M. Kahn

Charles M. Kahn

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

Francisco Rivadeneyra

Bank of Canada

Tsz-Nga Wong

Washington University in St Louis

Multiple version iconThere are 3 versions of this paper

Date Written: 2019-01-18

Abstract

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

Kahn, Charles M. and Rivadeneyra, Francisco and Wong, Tsz-Nga, Should the Central Bank Issue E-Money? (2019-01-18). Available at SSRN: https://ssrn.com/abstract=3318871 or http://dx.doi.org/doi.org/10.20955/wp.2019.003

Charles M. Kahn (Contact Author)

University of Illinois, Urbana-Champaign ( email )

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

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

Bank of Canada

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Feseral Reserve Bank of Saint Louis

411 Locust St
Saint Louis, MO 63011
United States

Francisco Rivadeneyra

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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

Tsz-Nga Wong

Washington University in St Louis ( email )

One Brookings Drive
St. Louis, MO 63130
United States

HOME PAGE: http://sites.google.com/site/tszngawong/

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