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The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies

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  • Aleksander Berentsen
  • Fabian Schär

Abstract

We characterize various currencies according to their control structure, focusing on cryptocurrencies such as Bitcoin and government-issued fiat money. We then argue that there is a large unmet demand for a liquid asset that allows households and firms to save outside of the private financial sector.

Suggested Citation

  • Aleksander Berentsen & Fabian Schär, 2018. "The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies," Review, Federal Reserve Bank of St. Louis, vol. 100(2), pages 97-106.
  • Handle: RePEc:fip:fedlrv:00097
    DOI: 10.20955/r.2018.97-106
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    File URL: https://doi.org/10.20955/r.2018.97-106
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    References listed on IDEAS

    as
    1. Berentsen, Aleksander & Kraenzlin, Sébastien & Müller, Benjamin, 2018. "Exit strategies for monetary policy," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 20-40.
    2. Aleksander Berentsen & Alessandro Marchesiani & Christopher Waller, 2014. "Floor Systems for Implementing Monetary Policy: Some Unpleasant Fiscal Arithmetic," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 523-542, July.
    3. Aleksander Berentsen & Nicole Jonker & Malte Krueger & Harry Leinonen & Katharina Linsbauer & Nikos Passas & Fabian Schär & Friederich Schneider & Paolo Tasca & Jens Ulbrich, 2016. "Cash on Trial," SUERF Studies, SUERF - The European Money and Finance Forum, number 2016/1 edited by Christian Beer & Ernest Gnan & Urs W. Birchler, August.
    4. Aleksander Berentsen & Fabian Schär, 2018. "A Short Introduction to the World of Cryptocurrencies," Review, Federal Reserve Bank of St. Louis, vol. 100(1), pages 1-16.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Donato Masciandaro, 2018. "Central Bank Digital Cash and Cryptocurrencies: Insights from a New Baumol–Friedman Demand for Money," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 540-550, December.
    2. Christian Pfister, 2019. "Central Bank Digital Currency:One, Two or None?," Working papers 732, Banque de France.
    3. Jesus Fernandez-Villaverde & Daniel Sanches & Linda Schilling & Harald Uhlig, . "Central Bank Digital Currency: Central Banking For All?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    4. Charles M. Kahn & Francisco Rivadeneyra & Tsz-Nga Wong, 2018. "Should the Central Bank Issue E-money?," Staff Working Papers 18-58, Bank of Canada.
    5. Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro, 2018. "Between Cash, Deposit And Bitcoin: Would We Like A Central Bank Digital Currency? Money Demand And Experimental Economics," BAFFI CAREFIN Working Papers 1875, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    6. Dirk Niepelt, 2020. "Reserves for All? Central Bank Digital Currency, Deposits, and Their (Non)-Equivalence," International Journal of Central Banking, International Journal of Central Banking, vol. 16(3), pages 211-238, June.
    7. Eun Young Oh & Shuonan Zhang, 2020. "Central bank digital currency and informal economy," Working Papers in Economics & Finance 2020-11, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    8. Mohammad Davoodalhosseini, 2018. "Central Bank Digital Currency and Monetary Policy," Staff Working Papers 18-36, Bank of Canada.
    9. Janet Hua Jiang & Enchuan Shao, 2020. "The Cash Paradox," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 177-197, April.
    10. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    11. Svetlana V. Krivoruchko, 2018. "Cryptocurrencies and Approaches to Their Regulation," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 127006, Russia, issue 5, pages 120-129, October.
    12. Jonathan Chiu & Mohammad Davoodalhosseini & Janet Hua Jiang & Yu Zhu, 2019. "Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment," Staff Working Papers 19-20, Bank of Canada.
    13. Mojmir Hampl & Tomas Havranek, 2020. "Central Bank Equity as an Instrument of Monetary Policy," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(1), pages 49-68, March.
    14. Belke, Ansgar & Beretta, Edoardo, 2019. "From cash to central bank digital currencies and cryptocurrencies: A balancing act between modernity and monetary stability," Ruhr Economic Papers 816, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Hossein Nabilou, 2020. "Testing the waters of the Rubicon: the European Central Bank and central bank digital currencies," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 299-314, December.
    16. Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro & Giovanno Rabitti, 2018. "Cryptocurrencies, central bank digital cash, traditional money: does privacy matter?," BAFFI CAREFIN Working Papers 1895, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    17. Jonathan Chiu & Janet Hua Jiang & Seyed Mohammadreza Davoodalhosseini & Yu Zhu, 2019. "Central Bank Digital Currency and Banking," 2019 Meeting Papers 862, Society for Economic Dynamics.
    18. Carlo Gola & Andrea Caponera, 2019. "Policy issues on crypto-assets," LIUC Papers in Economics 2019-7, Cattaneo University (LIUC).
    19. David Andolfatto, 2018. "Assessing the Impact of Central Bank Digital Currency on Private Banks," Working Papers 2018-026, Federal Reserve Bank of St. Louis, revised 22 Apr 2020.

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    More about this item

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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