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Getting the balance right: Crypto, stablecoin and CBDC

Author

Listed:
  • Wilko Bolt
  • Vera Lubbersen
  • Peter Wierts

Abstract

The rise of new forms of private money is reviving a long-standing debate on the appropriate balance between private and public interests in money and payments. The main aim of this paper is to explore an integrated policy analysis of various digital assets that may function as money: bank deposits, non-backed crypto’s, stablecoins and Central Bank Digital Currency (CBDC). In our view, public and private money should coexist to get the best of both worlds: trust and innovation. Getting the balance right is however not an easy task. It requires a digital update of public money and effective regulation of crypto’s and stablecoins. We argue that convertibility between public and private money should be a leading principle both for the design of CBDC and for the regulation of stablecoins that could potentially be widely adopted as a means of payment.

Suggested Citation

  • Wilko Bolt & Vera Lubbersen & Peter Wierts, 2022. "Getting the balance right: Crypto, stablecoin and CBDC," Working Papers 736, DNB.
    • Handle: RePEc:dnb:dnbwpp:736
    as

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    File URL: https://www.dnb.nl/media/jo3h1dlu/working_paper_no-_736.pdf
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    References listed on IDEAS

    as
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    3. Wilko Bolt & Maarten R.C. Van Oordt, 2020. "On the Value of Virtual Currencies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(4), pages 835-862, June.
    4. Stephen Quinn & William Roberds, 2016. "Death of a Reserve Currency," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 63-103, December.
    5. Igor Makarov & Antoinette Schoar, 2021. "Blockchain Analysis of the Bitcoin Market," NBER Working Papers 29396, National Bureau of Economic Research, Inc.
    6. Quinn, Stephen & Roberds, William, 2014. "How Amsterdam got fiat money," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 1-12.
    7. Bengt Holmstrom, 2015. "Understanding the role of debt in the financial system," BIS Working Papers 479, Bank for International Settlements.
    8. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    9. Isabel Schnabel & Hyun Song Shin, 2018. "Money and trust: lessons from the 1620s for money in the digital age," BIS Working Papers 698, Bank for International Settlements.
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    Cited by:

    1. Maarten van Oordt, 2022. "The Emerging Autonomy–Stability Choice for Stablecoins," Tinbergen Institute Discussion Papers 22-015/IV, Tinbergen Institute.
    2. Alexey Ponomarenko, 2023. "National Currencies in International Settlements: Main Mechanisms," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 35-47, September.
    3. Ozili, Peterson K, 2023. "Assessing global and local interest in eNaira CBDC and cryptocurrency information: implications for financial stability," MPRA Paper 116978, University Library of Munich, Germany.

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    More about this item

    Keywords

    digital payments; crypto’s; stablecoins; CBDC; regulation;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services

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