Digital currencies: Implications for central banks

Bitcoin and other digital currencies are drawing increasing attention around the world. While bitcoin is not going to replace the dollar or other official currencies anytime soon, the rise of digital currencies poses challenges and opportunities to the Federal Reserve and other central banks. Are we at the cusp of an era in which paper currency is (finally) obsolete? Should central banks create their own e-currencies? Do digital currencies create financial stability risks? How should central banks regulate them? Is the central bank’s franchise at risk? Could the spread of digital currencies influence the conduct of monetary policies, the efficacy of capital controls, the nature of cross-border capital flows?

On April 17 from 2 to 3:30 pm at the Hutchins Center on Fiscal & Monetary Policy at Brookings, Eswar Prasad, Senior Fellow in the Global Economy at Brookings and professor at Cornell University, discussed a framework for thinking through these issues and reviewed how different central banks are responding to the changes and challenges they face. Following Prasad’s report, a panel of central bankers responded. The panelists then took questions from the audience after the discussion.