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Report
Regulating Decentralized Systems: Evidence from Sanctions on Tornado Cash
Blockchain-based systems are run by a decentralized network of participants and are designed to be censorship-resistant. We use sanctions imposed by the U.S. Department of Treasury on Tornado Cash (TC), a smart contract protocol, to study the impact and effectiveness of regulation in decentralized systems. We document an immediate and lasting impact on TC following the sanction announcement, measured by market reaction, transaction volume, and diversity of users. Still, net flows into TC contracts recover to and surpass pre-announcement levels for most pools, supporting viability of TC. ...
Discussion Paper
Examining CBDC and Wholesale Payments
This paper explores whether a new settlement asset in the form of central bank money is essential for a new platform that processes wholesale payment transactions. Central bank money currently exists for wholesale transactions in the form of depository institution balances at the Federal Reserve (Reserve Banks) used for Fedwire® Funds Service (Fedwire).