Shadow Digital Money
18 Pages Posted: 8 Apr 2020
Date Written: March 13, 2020
Promises by media platforms to provide digital transaction services will likely lead to a flood of new money. While these developments are potentially valuable, under current law the money created is unsound. It is not insured by the government, nor is it backed by safe assets. We should not yoke good technology to unsound money. Federal regulation is needed to guarantee safety and soundness, to restore monetary control to the Federal Reserve, and to prevent a race to the bottom between competing state regulatory regimes. With modest changes to the U.S. Code, innovation in payments will be just that—innovation in payments—and not also unsupervised and unsound money issuance.
Keywords: Money and payments, financial institutions, banking, financial regulation, MSBs, money transmitters, monetary policy
JEL Classification: G01, G20, G21, G23, G28
Suggested Citation: Suggested Citation