Search Results
Working Paper
Central Bank Digital Currencies: An Old Tale with a New Chapter
We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these transformations is that success in the micro dimension can encourage macro failure. Overcoming this paradox may require politically uncomfortable compromises. We propose that such compromises will be necessary for the success of CBDCs.
Discussion Paper
The Future of Payments Is Not Stablecoins
Stablecoins, which we define as digital assets used as a medium of exchange that are purported to be backed by assets held specifically for that purpose, have grown considerably in the last two years. They rose from a market capitalization of $5.7 billion on December 1, 2019, to $155.6 billion on January 21, 2022. Moreover, a market that was once dominated by a single stablecoin—Tether (USDT)—now boasts five stablecoins with valuations over $1 billion (as of January 21, 2022; data about the supply of stablecoins can be found here). Analysts have started to pay increased attention to the ...
Discussion Paper
What Makes Cryptocurrencies Different?
Permissionless blockchains, which support the most popular cryptocurrency networks like Bitcoin and Ethereum, have shown that it is possible to transfer value without relying on centralized trusted third parties, something that is new and remarkable (although perhaps most clearly useful for less developed financial markets). What makes permissionless blockchains able to transfer value without relying on a small number of trusted third parties is the combination of several components that all need to work together. The components themselves are not particularly new, but the combination of ...
Briefing
Observations from the Retail CBDCs of the Caribbean
Three retail central bank digital currencies (rCBDCs) have been issued in the Caribbean, but thus far all have struggled to achieve expected adoption from both consumers and merchants. The efforts to launch these rCDBCs offer three takeaways: 1) the underlying technologies of rCBDCs may have little effect on adoption; 2) an rCBDC may need to demonstrate value added to entice consumers to use it; and 3) an rCBDC platform may need to be integrated into the larger financial ecosystem to be widely adopted.
Tokens vs. Accounts: Why the Distinction Still Matters
Computer science experts may say the difference is irrelevant in the digital world. But when it comes to payments, distinguishing the two still has value in the real world.
Working Paper
Eggs in One Basket: Security and Convenience of Digital Currencies
Digital currencies store balances in anonymous electronic addresses. We analyze the trade-offs between safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords of many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and tradeoffs on these dimensions; we analyze the welfare effects of differing industry structures and interdependencies, and in particular the consequences ...
Speech
Considerations on the Road Ahead for Monetary Policy Implementation
Remarks at the New York Fed and Columbia SIPA Monetary Policy Implementation Workshop, New York City.
Speech
The first line of defense and financial crime: keynote Address at the 1LoD Summit, New York City
Keynote Address at the 1LoD Summit, New York City.
Journal Article
The Blockchain Revolution: Decoding Digital Currencies
Cryptocurrencies and decentralized finance have grown considerably since the publication of the white paper on bitcoin in 2009. This article presents an overview of cryptocurrencies, blockchain technology, and their applications, explaining the spirit of the enterprise and how it compares with traditional operations. We discuss money, digital money, and payments; cryptocurrencies, blockchain, and the double-spending problem of digital money; decentralized finance; and central bank digital currency.
Speech
Welcoming Remarks
St. Louis Fed President Jim Bullard welcomed Eswar S. Prasad, who delivered the 2022 Homer Jones Memorial Lecture. Prasad is Tolani Senior Professor of Trade Policy and professor of economics at Cornell University. He is also a senior fellow at the Brookings Institution. Prasad’s 2021 book, The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance, was the subject of his lecture.