Blockchain, Cryptocurrencies and Central Banks

Keynote Presentation by David Andolfatto

Presentation slides (PDF)

After a brief welcome by Executive Vice President Julie L. Stackhouse, St. Louis Fed economist David Andolfatto talked about “demystifying” blockchain, which he called a form of communal recordkeeping. Andolfatto, a vice president of research, discussed:

• Why we need these types of database management systems.
• What sort of role they play in society.
• How communal recordkeeping is related to the institution of monetary exchange.

He also spoke about “delegated” recordkeeping systems for currency, in which a central authority manages the database of information about the money. Andolfatto made a case for a central bank digital currency. Among other arguments, he said that a trusted intermediary would be more efficient at processing payments than any communal recordkeeping system. He also said that a central bank cryptocurrency could help level the playing field for small businesses on payment processing costs and could promote financial inclusion.

Discussion and Audience Q&A

Stackhouse offered a few practical considerations on the idea of the Federal Reserve issuing or backing a digital currency, including the need for the central bank to have customer identifications to prevent money laundering and the need for even stronger cybersecurity. She and Andolfatto answered questions from the audience, including on what would happen if there’s a discrepancy in the recordkeeping; how issuing cryptocurrency might work alongside a central bank’s monetary policy role; and what would have to happen to eliminate cryptocurrency volatility.

Related Resources

• Hear Andolfatto's interview on our Timely Topics podcast, "Bitcoin: Beyond the Basics" (released Aug. 27, 2018).
• See the latest St. Louis Fed research on cryptocurrencies and fintech.