Shadow Digital Money

18 Pages Posted: 8 Apr 2020

See all articles by James McAndrews

James McAndrews

Wharton Financial Institutions Center

Lev Menand

Columbia Law School

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

McAndrews, James and Menand, Lev, Shadow Digital Money (March 13, 2020). Available at SSRN: or

James McAndrews

Wharton Financial Institutions Center ( email )

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
9176090086 (Phone)
19104 (Fax)

Lev Menand (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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