Regulating Digital Currencies: Towards an Analytical Framework

Boston University Law Review, Forthcoming 2022

Duke Law School Public Law & Legal Theory Series No. 2021-09

50 Pages Posted: 29 Jan 2021 Last revised: 23 Mar 2021

Date Written: January 28, 2021

Abstract

Digital currencies have the potential to improve the speed and efficiency of payments and to broaden financial inclusion. The principal goal is to facilitate payments among consumers on a day-to-day basis as an alternative to cash, both domestically and across national borders. This Article begins by critically examining and critiquing the ongoing progress to try to develop retail digital currencies, focusing on the two most feasible approaches: central bank digital currencies (CBDC), and privately-issued currencies that are backed by assets having intrinsic value (stablecoins). The Article then analyzes how these digital currencies should be regulated and supervised, exploring their similarities and differences. Both CBDC and stablecoins raise innovative legal issues as well as the types of legal issues normally associated with payment systems, although in novel contexts. If widely used, stablecoins also could impair central banks’ ability to control monetary policy and possibly undermine confidence in the value or operational continuity of currencies, which could threaten international monetary and financial stability. Stablecoin regulation must also address that potential threat.

Suggested Citation

Schwarcz, Steven L., Regulating Digital Currencies: Towards an Analytical Framework (January 28, 2021). Boston University Law Review, Forthcoming 2022, Duke Law School Public Law & Legal Theory Series No. 2021-09, Available at SSRN: https://ssrn.com/abstract=3775136 or http://dx.doi.org/10.2139/ssrn.3775136

Steven L. Schwarcz (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)

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