David Andolfatto: The Impact of Central Bank Digital Currencies on the Banking Sector

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Since the rise of digital currencies and cryptocurrencies, central banks are considering the role these new forms of money may play in our evolving digital economy. One of the ideas studied is the notion of a central bank digital currency. While people and companies can hold central bank liabilities in the form of cash, only licensed banks have access to digital cash accounts with central banks.

We’re joined by David Andolfatto, VP of Research at the Federal Reserve Bank of St. Louis. David was previously on the podcast to discuss his idea for Fedcoin, a central bank issued cryptocurrency. In a recent paper, he explores the impact central bank digital currencies may have on the monopolistic banking sector.

Topics covered in this episode:

• The state of central bank research on digital currencies and cryptocurrencies
• The idea that central banks may hold Bitcoin reserves
• David’s new paper on the impact of central bank digital currencies (CBDC)
• The potential impacts of CBDC’s on the banking sector and our economy
• The role of fractional reserve banking in our economy
• How fractional reserve banking applies to cryptocurrencies
• The Debreu model and the need for money in an entirely liquid market
• David’s outlook for the future of Bitcoin and cryptocurrencies

Episode links:

• Assessing the Impact of Central Bank Digital Currency on Private Banks (paper)
• Smart Contracts and Asset Tokenization (article)
• My perspective on the Bitcoin Project (article)
• The Trust Machine: The Story of Bitcoin (article)
• Fedcoin: On the Desirability of a Government Cryptocurrency (article)
• David's last appearance on the podcast

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This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/266