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Platforms, Tokens, and Interoperability

Author

Listed:
  • Markus Brunnermeier

    (Princeton University)

  • Jonathan Payne

    (Princeton University)

Abstract

Digital money requires a ledger. By integrating this ledger with its other ledgers, a platform can enforce repayment of uncollateralized credit, beyond the ability of the banking sector. However, by controlling interoperability to other platforms' ledgers, an incumbent platform can "lock-in" customers and increase its market power. Open banking, which gives users control of interoperability, limits uncollateralized credit. Introducing CBDC as digital legal tender (on an isolated ledger) hurts credit extension, but enhances it when combined with an open architecture public ledger as a "smart CBDC."

Suggested Citation

  • Markus Brunnermeier & Jonathan Payne, 2022. "Platforms, Tokens, and Interoperability," Working Papers 2022-8, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2022-8
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    More about this item

    Keywords

    Tokens; ledgers; interoperability; smart contracts; platforms; open banking; open architecture; financial inclusion; smart CBDC; PlatFi;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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