<i>CB reserves currently play a central role in payment systems. If two parties need to settle a transaction but hold deposits at different banks, the payment requires a transfer of funds between the two banks. Banks net out such transfers and settle the residual amount using CB reserves as the medium of exchange.</i><p><i>If households and firms were given access to CBcoin accounts at the CB, banks’ dominant role as providers of payment services would be called into question. As a risk-free, interest-bearing asset, CBcoin would be preferable to bank deposits (and even paper currency, presuming anonymity concerns were addressed), encouraging households and firms to convert their bank deposits into CBcoin deposits.</i><p><i>In effect, retail payments (and securities transactions) would no longer have to be mediated by banks, as the funds would be transferred directly from one party’s CBcoin account to another’s. A disintermediated payment system could gradually replace the current centralised system and its associated credit and liquidity risks (see BIS (2003)). The main benefit to CBcoin account holders would be access to cheap and fast peer-to-peer transactions.</i><p>This sounds like all of the benefits of a centralized currency -- most importantly, stability and regulation -- with all of the benefits of current decentralized currency endeavours (Bitcoin, etc.). Assuming anonymity concerns are addressed, as they highlight.<p>The impact on the banking system, however, would indeed be substantial. Providing payment services is a significant source of revenue for banks.
"divorcing payments from private bank deposits and even putting an end to banks’ ability to create money."<p>Are there economists that support the idea of stopping the creation of new money? I assumed this was an underlying requirement of a health currency? New value is created every day by thousands of different sources, and the currency needs to be able to expand at the same rate.
Digital currency calls into question the role of traditional commercial banking. If you don't need to store your money in a bank anymore then what service do banks provide to their depositors? I've been imagining for a while now that commercial banks will eventually start looking more like investment intermediaries. You only put money in the "bank" if you're willing to take on some risk.
I'm not sure their CBcoin as I understand it would affect monetary policy much. Much of that related to the banking system and people depositing money to get interest and others borrowing it for mortgages and similar. Saving and borrowing won't go away with cryptocurrency so policy as to how much money is available to borrow and so on will still be there.
Some argue that free banking without central banks was a very stable period.
<a href="https://mises.org/library/free-banking-theory-history-and-laissez-faire-model-0" rel="nofollow">https://mises.org/library/free-banking-theory-history-and-la...</a><p>A question will arise to who owns what if there ever is a derivative bubble? Will we get digital currency decentralised made by hackers then?<p>Here is a visual representation of different types of money and markets.
<a href="http://money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/" rel="nofollow">http://money.visualcapitalist.com/all-of-the-worlds-money-an...</a>
I'm going to go the other way. I'd like to see the federal reserve provide cheap/simple free checking and savings accounts to the public with debit cards in order to force banks to add value above that.