tommaso mancinigriffoli
TRANSCRIPT
The Rise of Digital Money
Tommaso Mancini-GriffoliIMF; [email protected]
G20 Global Financial Stability ConferenceSeoul, Korea, November 5 2019
Based on: Adrian, Tobias and Tommaso Mancini-Griffoli (2019), “The Rise of Digital Money,” IMF Fintech Note, July.
Q: How will you pay?
A: With a stable storeof value!
What is stability? Two facets
Private money
Price: unit of account
Coffee
Exchange stability
Price stability
Consider Bank Deposits vs. Stablecoins
Price: unit of account
Coffee
Exchange stability
Price stability
vs.
Exchange Stability of Bank Deposits is High
Denomination
Exchange pledge
Backstop
Backing asset
Unit of accountFixed,
@ face value
Government
Mixed
Denomination
Exchange pledge
Backstop
Backing asset
StablecoinsExchange stability
Same as banks
Private
CB reserves
sCBDC
Same as banks
Private
Safe & liquid
E-money
Own
Variable, @ mkt value
Private
Mixed
I-money
Unit of accountFixed,
@ face value
Government
Mixed
Exchange Stability of Stablecoins Varies
Takeaway 1Multiple stablecoins exist
Of varying “exchange stability”
Indeed Risks to Exchange Stability
Private company
Private backing
Default Market FX LiquidityClaim?
Takeaway 2
QuestionWhy hold stablecoins?
Banks offer better “exchange stability”
A: With a stable store of value… and a convenient means of payment
Stablecoins offer greater convenience
Integrated User friendly
ComplementarityInteroperable, open
Global reachCross border
Transaction costsCost, speed
Network effectsOver large installed bases
Trust & accessFintechs vs banks
Takeaway 3Stablecoin adoption could be high
Banks can offer higher interest…Better means of payment.Stablecoins can deposit in banks…Offer banking services.
StablecoinsBank deposits
Store of value Means of payment
Stablecoin adoption could be high… not necessarily at the cost of banks
Multiple risks of stablecoins (now widely cited)
Disintermediation
Market contestability
Consumer protection
Financial stability
Privacy
Financial integrity
Would you trust stablecoins in a world:• without cash…• without access to a CB liability?
Do you need one?
But also: the “stablecoin paradox”?
More adoption
Less cash
Redemptions?
Less trust
Paradox 2: exchange stability undermines price stability?
Stablecoin
Domestic unit of account
Coffee
Exchange stability
Price stability
Paradox 2: exchange stability undermines price stability?
Stablecoin
Domestic unit of account
Coffee
Exchange stability
Price stability
• No demand for CB reserves as settlement asset?
• Dollarization from foreign stablecoins?
QuestionHow to tackle risks and avoid paradoxes?
One option…
StablecoinsRegulate Reserves at central bank
“Shadow bank” “Narrow bank”
Birth of synthetic CBDC → sCBDC
End user
Issuer TrustPay Pay
E-money Authorization
CB reserves
Holds
Claim
• Close to holding, and transacting in, central bank liability!• Simpler, cheaper, safer.• Public-private partnership… • conserving comparative advantages.
Advantages of sCBDC (though new risks emerge)
Exchange stability
No redemption
Interoperability Regulatory clarity
Addresses some risks of stablecoins…
...and paradoxes
Limit dollarization Could pay interest
The Rise of Digital Money
Tommaso Mancini-GriffoliIMF; [email protected]
G20 Global Financial Stability ConferenceSeoul, Korea, November 5 2019
Based on: Adrian, Tobias and Tommaso Mancini-Griffoli (2019), “The Rise of Digital Money,” IMF Fintech Note, July.