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1. Policy Pathways for Integrating Fast Payment Systems with Digital Currencies

Author:
S. Yash Kalash
Publication Date:
03-2025
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
The potential for coexistence between fast payment systems (FPSs) and digital currencies presents a significant opportunity to enhance the global digital financial ecosystem. Harmonizing regulations for FPSs and digital currencies is crucial for compliance, security and seamless integration, and investments in digital infrastructure and the development of open application programming interfaces will support communication between FPSs and blockchain platforms. In addition, global standards and cross-border agreements are essential to enable smooth international transactions using both systems, and collaboration between governments, central banks, and fintech and blockchain developers will accelerate innovation and ensure a secure, inclusive global financial ecosystem.
Topic:
Investment, Digital Currency, Digital Governance, and Financial Governance
Political Geography:
Global Focus

2. Decentralised finance: good technology, bad finance

Author:
Maria Demertzis and Catarina Martins
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The emergence of cryptocurrencies/crypto assets has allowed the provision of a new form of financial services, including payments and loans, known as decentralised finance (DeFi). Crypto assets currently represent only about 1 percent of total global financial assets and it is unlikely, in its current form, that DeFi will become a substitute for the traditional financial system, for three reasons. First, while decentralisation is very innovative, in practice the technology required to replace the role of intermediary is slow and costly in terms of energy use. This has led some crypto networks to adopt more centralised solutions to the problem of verification. Second, the automaticity behind the transactions does not allow for any legal recourse. If something goes wrong, there is no way to stop or reverse a transaction once it has been initiated. It is very difficult to imagine DeFi scaling up without the ability to challenge outcomes. Third, and perhaps most importantly, DeFi is for the most part self-referential. Crypto assets are exchanged for other crypto assets without being employed in activities that stimulate economic growth by creating jobs or facilitating investment. It is not likely for DeFi to grow enough to replace traditional finance unless it helps growth. Nevertheless, the technology that enables DeFi and crypto assets, distributed ledger technology (DLT), is very innovative and has managed to remove the intermediary without compromising the safety and finality of financial transactions. Hence, it is likely that the technology behind crypto assets and DeFi will feed into the mainstream and offer efficiency gains.
Topic:
Science and Technology, Regulation, Finance, Digitalization, and Digital Currency
Political Geography:
Global Focus

3. The Future of the Digital Asset Space

Author:
Christian Catalini and Nicholas Sanzi
Publication Date:
03-2023
Content Type:
Journal Article
Journal:
Brown Journal of World Affairs
Institution:
Brown Journal of World Affairs
Abstract:
Christian Catalini is founder of the MIT Cryptoeconomics Lab, and Research Scientist at MIT. He is also the Co-Founder and Chief Strategy Officer of Lightspark. Previously, he was a co-creator of Diem (formerly Libra), Chief Economist of the Diem Association, and Head Economist of Meta FinTech. While a Professor at MIT, Christian designed the MIT Digital Currency Research Study. In 2018, Christian was appointed as a Faculty Research Fellow in the Productivity, Innovation and Entrepreneurship Program at the National Bureau of Economic Research. He holds a PhD from the University of Toronto (Rotman School of Management), and MSc (summa cum laude) in Economics and Management of New Technologies from Bocconi University, Milan.
Topic:
Economics, Cryptocurrencies, Interview, Digital Currency, and Stablecoins
Political Geography:
Global Focus

4. Digitalization of Payments and Currency

Author:
Robert Fay, Keldon Bester, David Dodge, Serge Dupont, Mark Jewett, John Murray, and Laurie Wright
Publication Date:
06-2023
Content Type:
Special Report
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
As a growing number of countries adopt digital payments and currencies, the Centre for International Governance Innovation and Bennett Jones LLP hosted a virtual workshop on March 7, 2023, to discuss the implications for Canada. Building on their previous work in related fields, participants including Canadian and international experts from the public and private sectors as well as from academia explored four topics: payments system modernization, open banking, stablecoins and central bank digital currencies. Creating a trustworthy digital financial system in which Canadians can conduct personal and business transactions in a reliable way is key to Canada’s successful adoption of digital payments and currencies.
Topic:
Governance, Central Bank, Currency, Innovation, Conference, Digitalization, and Digital Currency
Political Geography:
Global Focus

5. Retail Central Bank Digital Currency: Has Its Time Come?

Author:
Pierre L. Siklos
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
As central banks around the world prepare to launch central bank digital currencies (CBDCs), this paper looks at issues surrounding a retail version of CBDCs that would complement notes and coins for consumers. To build the public’s trust in this type of digital currency, concerns such as loss of privacy and security of financial transactions must first be addressed. In addition to these concerns, CBDCs carry the potential risks of overburdening central banks and disrupting cross-border transactions. These and other challenges can be overcome by ensuring the right regulatory and supervisory measures are in place before CBDCs take hold.
Topic:
Regulation, Finance, Central Bank, Banking, and Digital Currency
Political Geography:
Global Focus

6. The Price of Speculation: Cryptocurrencies and Climate Change

Author:
Izaura Solipa and Gerald Epstein
Publication Date:
08-2022
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Cryptocurrencies are a form of digital currency whose popularity has rapidly increased over the past decade. What distinguishes them from other electronic currencies is their underlying technology known as the blockchain, a decentralized public ledger in which transactions among the network peers are accurately and securely recorded. The validation and mining process, where new coins are issued, is highly computationally intensive and thus requires vast amounts of energy. The literature estimates energy consumption levels of the cryptocurrency mining to be as high as those of countries such as Angola, Iceland or Cuba, and a corresponding emission of at least 3-15 million tons of CO2. We discuss these estimated impacts of Bitcoin and other cryptocurrencies on both energy levels and the environment, and then outline alternative applications that could promote climate change mitigation. We argue that despite the latter applications and the possible benefits from the technology, particularly in the energy sector, the financial uses of blockchain are creating significant environmental costs without any clear social or economic benefit stemming from this largely speculative activity.
Topic:
Climate Change, Science and Technology, Economy, Cryptocurrencies, Blockchain, Digital Currency, and Speculation
Political Geography:
Global Focus

7. Which Type of Digital Currency for Financial Inclusion?

Author:
Diego Zuluaga
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
When the Libra Association first announced its plan to launch a private digital currency for domestic and cross‐​border payments — then consisting of a single token backed by a mix of stable fiat currencies — financial inclusion was a big part of its business case. With 1.7 billion people globally lacking a bank or mobile money account, Libra thought it was imperative for some of the world’s largest companies, including the leading social media platform, to join forces and bring cheap payments to the world’s “unbanked.” And while this project has faced a rocky reception from central bankers and regulators — for reasons good and bad — even they often frame the case for their own, public digital currencies (CBDCs) in terms of bringing cheap and fast electronic payments to the greatest possible number of people, as cash use and cash acceptance decline.
Topic:
Finance, Banks, Inclusion, and Digital Currency
Political Geography:
Global Focus

8. Some Thoughts on Central Bank Digital Currency

Author:
David Andolfatto
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The literature examining the question of central bank digital currency (CBDC) has grown immensely in a very short time. Much progress has been made since I first learned of the idea in a blogpost authored by J. P. Koning in 2014. That modest article soon led me to openly speculate on the merits of a central bank cryptocurrency in a talk I delivered at the International Workshop on P2P Financial Systems in Frankfurt (Andolfatto 2015). My audience, which consisted mainly of entrepreneurs, seemed to receive my talk with a polite mixture of bemusement and anxiety. Surely, I couldn’t be serious? To be honest, I’m not sure that I was. But then the threat of Facebook’s Libra came along, and central bankers around the world suddenly began to take the idea very seriously indeed.
Topic:
Finance, Social Media, Central Bank, Currency, and Digital Currency
Political Geography:
Global Focus

9. Central Bank Digital Currency as a Potential Source of Financial Instability

Author:
George Selgin
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Various proposals for a central bank digital currency (CBDC) involve different technical solutions to as many distinct problems. My concern is with the monetary policy implications of those (e.g., Bordo and Levin 2019; Ricks 2020) that would allow anyone to place deposits in a Fed Master Account, directly or using ordinary banks as brokers.
Topic:
Monetary Policy, Banks, Central Bank, Financial Stability, and Digital Currency
Political Geography:
Global Focus

10. Ten Stablecoin Predictions and Their Monetary Policy Implications

Author:
Caitlin Long
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Stablecoins are financial obligations issued on a blockchain. They are generally fully collateralized with either fiat currency deposits at a bank, or with short‐​term government bonds held at a custodian. They’re issued only by nonbanks, although FINMA in Switzerland does allow Swiss banks to issue Swiss franc–denominated stablecoins. Usually stablecoins do not pay interest, and they are designed to trade at par with the fiat currency. Because they are issued on a blockchain, they usually settle in minutes, with irreversibility, and — critically — they are “programmable,” which means users can build their own software applications to interact with them.
Topic:
Monetary Policy, Banks, and Digital Currency
Political Geography:
Global Focus and United States of America