SHOULD THE STATE OR THE MARKET PROVIDE DIGITAL CURRENCY?

Private commercial banks have been providing trusted money to the public for hundreds of years, in the form of banknotes (where allowed) and transferable deposit balances, as an integral part of their business model.1 Economically, money balances are a private good: they are rival in consumption (yo...

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Bibliographic Details
Published in:	The Cato journal 2021-04, Vol.41 (2), p.237-249
Main Author:	White, Lawrence H
Format:	Article
Language:	eng
Subjects:	Allocation Banking Banking industry Central bank digital currencies Central banks Clearance & settlement Clearing houses Commercial banks Currency Decision making Digital currencies Economic growth Entrepreneurs Expenditures Funding History Innovations Internet Markets Money Payment systems Post offices Profits Public enterprise Trade
Online Access:	Get full text
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Summary:	Private commercial banks have been providing trusted money to the public for hundreds of years, in the form of banknotes (where allowed) and transferable deposit balances, as an integral part of their business model.1 Economically, money balances are a private good: they are rival in consumption (you and I can't both simultaneously spend a given banknote or deposit balance) and excludable in supply (you and your bank can stop me from spending the funds in your wallet or account) (White 1999: 89).2 Accordingly, the market does not inherently fail to provide money efficiently. In a recent paper, Markus K. Brunnermeier and Dirk Niepelt (2019: 27) ask, "When does a swap between private and public money leave the equilibrium allocation and price system unchanged?" They conclude: "Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability" (p. 27).
ISSN:	0273-3072 1943-3468