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Crypto ‘Money’: Perspective of a Couple of Canadian Central Bankers

Author

Listed:
  • James Chapman
  • Carolyn A. Wilkins

Abstract

The market for cryptoassets has exploded in size in the 10 years since bitcoin was launched. The technology underlying cryptoassets, blockchain, has also been held up as a technology that promises to transform entire industries. In this paper we examine what is new about cryptoassets and their technology and how they may affect core central bank functions. We do this by outlining what we think are the three most important research and policy questions for central bankers around cryptoassets and cryptocurrencies specifically. First, what is fundamentally new about the technology that underpins cryptocurrencies and other cryptoassets? Second, how do cryptocurrencies affect a central bank’s role in the economy? Third, given the two challenges of a rise of cryptoassets and a decline in the use of cash, should digital payments be left entirely to the private sector or should central banks issue their own digital currencies? We discuss these three policy questions and highlight what aspects of them are most important to central bankers. Finally, we raise several new questions to help guide researchers in studying cryptoassets and their underlying technology.

Suggested Citation

  • James Chapman & Carolyn A. Wilkins, 2019. "Crypto ‘Money’: Perspective of a Couple of Canadian Central Bankers," Discussion Papers 2019-1, Bank of Canada.
  • Handle: RePEc:bca:bocadp:19-1
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    References listed on IDEAS

    as
    1. Wilko Bolt & Maarten van Oordt, 2016. "On the Value of Virtual Currencies," Staff Working Papers 16-42, Bank of Canada.
    2. Yu Zhu & Scott Hendry, 2019. "A Framework for Analyzing Monetary Policy in an Economy with E-money," Staff Working Papers 19-1, Bank of Canada.
    3. Ben Fung & Scott Hendry & Warren E. Weber, 2017. "Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies," Staff Working Papers 17-5, Bank of Canada.
    4. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    5. Athey, Susan & Parashkevov, Ivo & Sarukkai, Vishnu & Xia, Jing, 2016. "Bitcoin Pricing, Adoption, and Usage: Theory and Evidence," Research Papers 3469, Stanford University, Graduate School of Business.
    6. Jonathan Chiu & Tsz-Nga Wong, 2014. "E-Money: Efficiency, Stability and Optimal Policy," Staff Working Papers 14-16, Bank of Canada.
    7. Philip H. Dybvig & Douglas W. Diamond, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    8. Mohammad Davoodalhosseini & Francisco Rivadeneyra, 2018. "A Policy Framework for E-Money: A Report on Bank of Canada Research," Discussion Papers 18-5, Bank of Canada.
    9. Stephen D. Williamson, 2018. "Is Bitcoin a Waste of Resources?," Review, Federal Reserve Bank of St. Louis, vol. 100(2), pages 107-115.
    10. Ben Fung & Scott Hendry & Warren E. Weber, 2018. "Swedish Riksbank Notes and Enskilda Bank Notes: Lessons for Digital Currencies," Staff Working Papers 18-27, Bank of Canada.
    11. Christopher Henry & Kim Huynh & Gradon Nicholls, 2018. "Bitcoin Awareness and Usage in Canada: An Update," Staff Analytical Notes 2018-23, Bank of Canada.
    12. Rodney Garratt & Neil Wallace, 2018. "Bitcoin 1, Bitcoin 2, ....: An Experiment In Privately Issued Outside Monies," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1887-1897, July.
    13. Christopher Henry & Kim Huynh & Angelika Welte, 2018. "2017 Methods-of-Payment Survey Report," Discussion Papers 18-17, Bank of Canada.
    14. Walter Engert & Ben Fung, 2017. "Central Bank Digital Currency: Motivations and Implications," Discussion Papers 17-16, Bank of Canada.
    15. Warren E. Weber, 2016. "A Bitcoin Standard: Lessons from the Gold Standard," Staff Working Papers 16-14, Bank of Canada.
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    Citations

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    Cited by:

    1. Jonathan Chiu & Mohammad Davoodalhosseini & Janet Hua Jiang & Yu Zhu, 2019. "Central Bank Digital Currency and Banking," Staff Working Papers 19-20, Bank of Canada.
    2. Stephen Williamson, 2019. "Central Bank Digital Currency: Welfare and Policy Implications," 2019 Meeting Papers 386, Society for Economic Dynamics.
    3. Helmut Stix, 2019. "Ownership and purchase intention of crypto-assets – survey results," Working Papers 226, Oesterreichische Nationalbank (Austrian Central Bank).

    More about this item

    Keywords

    Bank notes; Digital Currencies; Financial services; Payment clearing and settlement systems;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H4 - Public Economics - - Publicly Provided Goods
    • P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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