Should the Central Bank Issue E-money?

22 Pages Posted: 19 Jan 2021

See all articles by Charles M. Kahn

Charles M. Kahn

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

Francisco Rivadeneyra

Bank of Canada

Tsz-Nga Wong

Federal Reserve Banks - Federal Reserve Bank of Richmond

Multiple version iconThere are 3 versions of this paper

Date Written: March 5, 2020

Abstract

Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the trade-off between public and private provision, and the trade-off between e-money and a central bank’s existing liabilities such as bank notes and reserves. The trade-offs depend on the technological setup of the e-money system (as a token or an account; centralized or decentralized); the potential improvement in the implementation and transmission of monetary policy; the risks to safety and privacy from cyber attacks; and 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 systems

Suggested Citation

Kahn, Charles M. and Rivadeneyra, Francisco and Wong, Tsz-Nga, Should the Central Bank Issue E-money? (March 5, 2020). Journal of Financial Market Infrastructures, Vol. 8, No. 4, 2020, Available at SSRN: https://ssrn.com/abstract=3768432

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

Federal 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

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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