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An early stablecoin? The Bank of Amsterdam and the governance of money

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  • Jon Frost
  • Hyun Song Shin
  • Peter Wierts

Abstract

This paper draws lessons on the central bank underpinnings of money from the rise and fall of the Bank of Amsterdam (1609-1820). The Bank started out as a "stablecoin": it issued deposits backed by silver and gold coins, and settled payments by transfers across deposits. Over time, it performed functions of a modern central bank and its deposits took on attributes of fiat money. The economic shocks of the 1780s, large-scale lending and lack of fiscal support led to its failure. Using monthly balance sheet data, we show how confidence in Bank money gave way to a run equilibrium, where the fall of the premium on deposits over coins ("agio") into negative territory was swift and precipitous. This holds lessons for the governance of digital money.

Suggested Citation

  • Jon Frost & Hyun Song Shin & Peter Wierts, 2020. "An early stablecoin? The Bank of Amsterdam and the governance of money," BIS Working Papers 902, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:902
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    Cited by:

    1. Grodecka-Messi, Anna & Zhang, Xin, 2023. "Private bank money vs central bank money: A historical lesson for CBDC introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    2. Raphael Auer & Rainer Boehme, 2021. "Central bank digital currency: the quest for minimally invasive technology," BIS Working Papers 948, Bank for International Settlements.
    3. Raphael Auer & Codruta Boar & Giulio Cornelli & Jon Frost & Henry Holden & Andreas Wehrli, 2021. "CBDCs beyond borders: results from a survey of central banks," BIS Papers, Bank for International Settlements, number 116.
    4. Maarten van Oordt, 2022. "The Emerging Autonomy–Stability Choice for Stablecoins," Tinbergen Institute Discussion Papers 22-015/IV, Tinbergen Institute.
    5. Raphael Auer & Giulio Cornelli & Jon Frost, 2020. "Rise of the central bank digital currencies: drivers, approaches and technologies," BIS Working Papers 880, Bank for International Settlements.
    6. Cyril Monnet & Hyun Song Shin & Jon Frost & Leonardo Gambacorta & Raphael Auer & Tara Rice, 2022. "Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 697-721, August.
    7. Auer, Raphael & Tercero-Lucas, David, 2022. "Distrust or speculation? The socioeconomic drivers of U.S. cryptocurrency investments," Journal of Financial Stability, Elsevier, vol. 62(C).
    8. Raphael Auer & Philipp Haene & Henry Holden, 2021. "Multi-CBDC arrangements and the future of cross-border payments," BIS Papers, Bank for International Settlements, number 115.
    9. Raphael A. Auer, 2022. "Embedded Supervision: How to Build Regulation into Decentralised Finance," CESifo Working Paper Series 9771, CESifo.
    10. Raphael Auer & Cyril Monnet & Hyun Song Shin, 2021. "Permissioned Distributed Ledgers and the Governance of Money," Diskussionsschriften dp2101, Universitaet Bern, Departement Volkswirtschaft.
    11. Auer, Raphael & Shin, Hyun Song & Monnet, Cyril, 2021. "Distributed Ledgers and the Governance of Money," CEPR Discussion Papers 16752, C.E.P.R. Discussion Papers.
    12. Douglas Arner & Raphael Auer & Jon Frost, 2020. "Stablecoins: potential, risks and regulation," BIS Working Papers 905, Bank for International Settlements.
    13. Raphael Auer & Marc Farag & Ulf Lewrick & Lovrenc Orazem & Markus Zoss, 2022. "Banking in the shadow of Bitcoin? The institutional adoption of cryptocurrencies," BIS Working Papers 1013, Bank for International Settlements.
    14. Jean Barthélémy & Paul Gardin & Benoit Nguyen, 2023. "Stablecoins and the Financing of the Real Economy," Working papers 908, Banque de France.
    15. Tatiana A. Gorbacheva, 2022. "Stablecoins As a New Word in the Cryptocurrency Market," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 126-139, February.

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    More about this item

    Keywords

    stablecoins; crypto-assets; central banks; money.;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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