A, B, or C? ... Endogenous Stablecoins and the Fisher Equation. Abstract: This note explores the potential effects of the widespread adoption of a global stablecoin (GSC) on key aggregate financial sector balance sheets in the United States. DOI: https://doi.org/10.17016/FEDS.2021.020. March 22, 2021, Transcripts and other historical materials, Quarterly Report on Federal Reserve Balance Sheet Developments, Community & Regional Financial Institutions, Federal Reserve Supervision and Regulation Report, Federal Financial Institutions Examination Council (FFIEC), Securities Underwriting & Dealing Subsidiaries, Regulation CC (Availability of Funds and Collection of Checks), Regulation II (Debit Card Interchange Fees and Routing), Regulation HH (Financial Market Utilities), Federal Reserve's Key Policies for the Provision of Financial Services, Sponsorship for Priority Telecommunication Services, Supervision & Oversight of Financial Market Infrastructures, International Standards for Financial Market Infrastructures, Payments System Policy Advisory Committee, Finance and Economics Discussion Series (FEDS), International Finance Discussion Papers (IFDP), Estimated Dynamic Optimization (EDO) Model, Aggregate Reserves of Depository Institutions and the Monetary Base - H.3, Assets and Liabilities of Commercial Banks in the U.S. - H.8, Assets and Liabilities of U.S. Matthew Malloy and David Lowe. There is also interest in the role stablecoins play in the implementation of policy instruments and operations of central banks. First, because its value is stable relative to fiat currency. 1021 0 obj
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... providing trust and efficiency. Hampering monetary policy. In fact, eMoney works exactly like a strict currency board, with each unit of eMoney — … However, there is no free flow of capital. They make their own monetary policy and they maintain an exchange rate. This analysis serves as a basis for European Central Bank (ECB) contributions to policy discussions in the European System of Central Banks (ESCB), the EU and other international fora, and with the Please cite this paper as: Malloy, Matthew, and David Lowe (2021). Branches and Agencies of Foreign Banks, Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks, Senior Loan Officer Opinion Survey on Bank Lending Practices, Structure and Share Data for the U.S. Offices of Foreign Banks, New Security Issues, State and Local Governments, Senior Credit Officer Opinion Survey on Dealer Financing Terms, Statistics Reported by Banks and Other Financial Firms in the United States, Structure and Share Data for U.S. Offices of Foreign Banks, Financial Accounts of the United States - Z.1, Household Debt Service and Financial Obligations Ratios, Survey of Household Economics and Decisionmaking, Industrial Production and Capacity Utilization - G.17, Factors Affecting Reserve Balances - H.4.1, Federal Reserve Community Development Resources, Federal Reserve's Work Related to Economic Disparities. The EU’s regulatory framework for stablecoins should preserve the bloc’s monetary sovereignty and address risks to monetary policy, as well as … the term used to describe the way in which a monetary authority (ex. ECB occasional paper series n. 230. monetary policy, the safety and efficiency of financial market infrastructures and payments, and the stability of the financial system. Cryptography meets monetary policy ... Stablecoins have garnered a lot of attention recently, both positive and negative. Private stablecoins such as Libra could affect the transmission of monetary policy through the economy, European Central Bank policy maker Benoit Coeure warned as … Especially if they reach global scale they could have a very negative impact on the effectiveness of the monetary policy. h�bbd``b`�$W��v �2$�H0��X�@�&KH������@�+�MHp� ���L��E@#1���? For financial institutions including the People's Bank of China and the Bank of England, blockchain technology is becoming an increasingly important part of monetary policy. Stablecoins can be linked to asset classes such as physical currencies, baskets of currencies, other cryptocurrencies and even real estate. Speech given by the Governor of the Bank of England at the Jackson Hole Symposium 2019. Global stable coins have also the potential to challenge monetary sovereignty and change the way monetary policy works. Fourth, stablecoins could promote illicit activities. The European Central Bank wants veto power on the launch of stablecoins such as Facebook's Diem in the euro zone ... the assessment of the potential threat to the conduct of monetary policy… Global Stablecoins: Monetary Policy Implementation Considerations from the U.S. Perspective. Over the past decade, digital currencies and payment instruments—including cryptocurrencies, global stablecoins, and central bank digital currency (CBDC)—have emerged as important innovations with potentially large impacts on the international monetary and financial system. Carney, M. (2019). In contrast to Libra, it employs a form of automated monetary policy to keep its price stable, contracting the supply when prices are too low and expanding it when prices are too high. A stablecoin monetary order may end US dollar dominance Premium Cryptos are a big hit in emerging markets with capital curbs like Nigeria reuters 3 … Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. Stable coins could hamper monetary policy in a number of circumstances. In addition, on the more tailored subject of stablecoins in particular, Adachi et al. %%EOF
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If unregulated, stablecoins pose many risks for monetary policy, anti-money laundering/ know your customer, and consumer protections," Bernstein says. Stablecoins will be an important new tool for monetary policymakers. 2021-020. While there are a range of factors that will impact the pace and shape of digital transformation in the financial sector, this paper focuses prim… I have outlined the key role of authorities in ensuring the stability of money, through issuing and ensuring confidence in central bank money (from monetary policy through to making it hard to counterfeit), and regulating banks to ensure commercial bank money Stable coins may negatively impact financial stability and monetary policy. Considerations from the U.S. Perspective. Monetary policy traditionally has been used as a mechanism to adjust economic demand for the purpose of delivering steady, reliable growth rates. How do stablecoins work? The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. In search for stability in crypto-assets: Are stablecoins the solution? Search in Google Scholar. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking. In addition, ongoing conversion of fiat currencies to stablecoins may place additional pressure on domestic currencies, and distort the effect of monetary policy. This would be a new form of “dollarization” and might undermine monetary policy, financial development, and economic growth. Stablecoins have many of the features of cryptoassets but seek to stabilise the price of the “coin” by linking its value to that of a pool of assets. This note explores the potential effects of the widespread adoption of a global stablecoin (GSC) on key aggregate financial sector balance sheets in the United States. Even some of the world's biggest economies are looking into launching new stablecoins — often referred to as central bank digital currencies, or CBDCs. %PDF-1.5
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Stablecoins have high natural velocity, which means they create liquidity without using leverage. Global Stablecoins: Monetary Policy Implementation. By analyzing these individual transactions, we infer aggregate and compositional effects on U.S. commercial banking sector and Federal Reserve balance sheets.
