New Economy Forum: Central Bank Digital Currencies and the International Monetary System

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Will central bank digital currencies improve the stability of the international monetary and financial system? Will they lead to a re-configuration of international currencies and the global financial safety net? This panel of policymakers and academics will provide interesting perspectives on possibilities and future dynamics.

Moderator
Ceyla Pazarbasioglu
Director of the IMF’s Strategy, Policy, and Review Department (SPR)

Panelists


Markus Brunnermeier
Edwards S. Sanford Professor at Princeton University

Markus Brunnermeier is the Edwards S. Sanford Professor at Princeton University. He is a faculty member of the Department of Economics and director of Princeton's Bendheim Center for Finance. He is also a research associate at NBER, CEPR, and CESifo and a member of the Bellagio Group on the International Economy. He is a Sloan Research Fellow, Fellow of the Econometric Society, Guggenheim Fellow and the recipient of the Bernácer Prize granted for outstanding contributions in the fields of macroeconomics and finance. He is/was a member of several advisory groups, including to the IMF, the Federal Reserve of New York, the European Systemic Risk Board, the Bundesbank and the U.S. Congressional Budget Office. Brunnermeier was awarded his Ph.D. by the London School of Economics (LSE). His research focuses on international financial markets and the macroeconomy with special emphasis on bubbles, liquidity, financial and monetary price stability.

Neha Narula
Director, Digital Currency Initiative, MIT Media Lab

Neha Narula is the Director of the Digital Currency Initiative, a part of the MIT Media Lab focusing on cryptocurrencies and blockchain technology. She received her PhD in computer science from MIT in 2015 and graduated from Dartmouth College with majors in mathematics and computer science. Her current research interests are in cryptocurrencies and distributed systems. She has designed and taught three courses at MIT on cryptocurrencies and blockchains and is a lecturer at Sloan. She has been engaged in a research collaboration with the Federal Reserve Bank of Boston on Project Hamilton, to engage in research to understand the technology tradeoffs involved in a hypothetical digital dollar. In 2018, Neha was named to WIRED's list of 25 leaders shaping the next 25 years of technology and to Fortune's Ledger 40 under 40 list. She is a member of the World Economic Forum's Global Blockchain Council. From 2003 to 2009, Neha was a software engineer at Google. Her work has appeared in TechCrunch, Blackhat, WIRED, PBS NewsHour, CNBC, Amanpour and Company, and 60 minutes.

Hyun Song Shin
Economic Adviser and Head of Research, Monetary and Economic Department - BIS

 

As the BIS Economic Adviser, Hyun Song Shin co-leads the Monetary and Economic Department and is a member the Bank’s Executive Committee. Previously an academic (at Princeton University, Oxford University and the London School of Economics), he has been an intellectual leader in the fields of banking, international finance and monetary economics, topics on which he has published widely, both in leading academic and official publications. One area of recent focus has been in developing the BIS's research program on digital innovation and the financial system, including the design of central bank digital currencies and their implications for users, financial intermediaries and the central bank. Mr Shin was part of the BIS management team that developed the BIS Innovation Hub, and served as its Interim Head at its launch in 2019.

Seminar Report


The international monetary system (IMS) might be at the cusp of a revolution driven by the emergence of digital money, including central bank digital currencies (CBDCs). The panelists discussed if CBDCs will improve the stability of the international monetary and financial system and lead to a re-configuration of reserve currencies and the global financial safety net.

Key Points:

  • CBDC and stability of the IMS. Panelists concurred that the impact of CBDCs on financial stability will depend on their exact design and the regulatory environment. Brunnermeier noted that instead of worrying about the impact of CBDC on the current IMS, we should focus on how CBDCs could become another safe asset and contribute positively to financial stability. Narula stressed the importance of carefully designed access rules. Shin noted that monetary cooperation and recognition of digital identity will be critical, while Narula remarked that operationalizing digital identity would be challenging in practice.
  • Transition from current GFSN to one with CBDCs. Brunnermeier highlighted that a new system comes with financial stability risks as well as opportunities. A new global lender of last resort feature and “more and smart regulation” will be critical for a successful transition. Narula added that regulatory standards will be inevitably shaped by those who implement CBDCs fastest, but Shin noted the process will necessarily be long-drawn-out due to the coordination required to arrive at common standards.
  • Private digital money. Reflecting on the influence of private digital money, Brunnermeier hypothesized that countries, particularly the smaller ones, might choose to create their own CBDCs to provide their citizens a safe asset instead of acquiring private digital money. Narula was concerned that, for example, in case of stablecoins, excessive focus was placed on financial risks, which are largely known, and that there was a less-well understood and potentially larger technological risk, as stablecoins do not operate on the traditional financial infrastructure.

Contributor: Veronika Sola

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