The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies

April 16, 2018
By  Aleksander Berentsen ,  Fabian Schär

Abstract

We characterize various currencies according to their control structure, focusing on cryptocurrencies such as Bitcoin and government-issued fiat money. We then argue that there is a large unmet demand for a liquid asset that allows households and firms to save outside of the private financial sector. Central banks could offer such an asset by simply allowing households and firms to open accounts with them. Finally, we conclude that a central bank will not issue cryptocurrencies in the sense of a truly decentralized and permissionless asset that allows users to remain anonymous.

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About the Authors
Aleksander Berentsen

Aleksander Berentsen is a St. Louis Fed research fellow and a professor of economics at the Faculty of Business and Economics of the University of Basel.

Aleksander Berentsen

Aleksander Berentsen is a St. Louis Fed research fellow and a professor of economics at the Faculty of Business and Economics of the University of Basel.

Fabian Schär

Fabian Schär is a professor for distributed ledger technologies and fintech at the University of Basel and the managing director of the Center for Innovative Finance at the Faculty of Business and Economics, University of Basel.

Fabian Schär

Fabian Schär is a professor for distributed ledger technologies and fintech at the University of Basel and the managing director of the Center for Innovative Finance at the Faculty of Business and Economics, University of Basel.

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Editors in Chief
Michael Owyang and Juan Sanchez

This journal of scholarly research delves into monetary policy, macroeconomics, and more. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System. View the full archive (pre-2018).

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