Pierpaolo Benigno, 26 April 2019

Cryptocurrencies have attracted the attention of consumers, policymakers and the media. This column investigates whether they can jeopardise the primary function of central banks, namely, controlling inflation and economic activity. Currency competition can succeed in calming inflation and preventing the sort of manipulation of interest rates and prices to which governments have historically been prone. But currency competition may also lead to government money losing the function of medium of exchange, which could be risky and lead government currency into further troubles. 

Antonio Fatás, Beatrice Weder di Mauro, 26 March 2019

We should not expect a high correlation between ICO tokens and the price of Bitcoin or Ethereum given that they have very different business cases. This column demonstrates that this was indeed the case during 2007, but the moment the Bitcoin/Ethereum bubble burst, the correlation with ICOs increased and it remained high even when prices had stabilised. This may have been because the ICO market is still in its infancy and needs to mature, or it may indicate that ICOs were just one of the children of the hype and are likely to share the fate of major cryptocurrencies.

Marlene Amstad, 21 March 2019

Two events have shaped the financial system over the past ten years: the Global Crisis and the rise of fintech. But while the lessons learned after the crisis have been widely discussed and the regulatory response broadly agreed upon, the question of whether and how to regulate fintech is a topic of an ongoing policy debate. This column discusses the three basic options that regulators have: ignore it, ‘duck type’ rules into existing regulations, or specifically tailor new regulations.

David Andolfatto, 17 March 2019

The idea of a central bank digital currency has prompted a mixed reaction among economists. This column uses a simple theoretical framework to investigate the impact of such a currency on a monopolistic banking sector. There are two main results. First, the introduction of an interest-bearing digital currency increases financial inclusion, diminishing the demand for physical cash. Second, while an interest-bearing digital currency reduces monopoly profit, it need not disintermediate banks in any way. A central bank digital currency may, in fact, lead to an expansion of bank deposits if the resulting competition compels banks to raise their deposit rates.

Raphael Auer, 08 March 2019

Bitcoin and related cryptocurrencies are exchanged via simple technical protocols for communication between participants, as well as a publicly shared ledger of transactions known as a blockchain. This column discusses research on how cryptocurrencies verify that payments are final, that is, that they are irreversible once written into the blockchain. It points to the high costs of achieving such finality via ‘proof-of-work’ and to a crucial externality in the transaction market, and argues that with the current technology, the liquidity of cryptocurrencies is set to shrink dramatically in the years to come.

Antonio Fatás, 05 March 2019

In recent years, the arrival of new financial technologies has opened a debate about the extent of their implications for the nature of money, the way new ventures are funded, and so on. This column introduces a new Vox eBook that summarises current research on the impact of these changes and how to manage the possible disruption in financial markets, where governance and regulation are central.

Tommaso Mancini-Griffoli, Maria Soledad Martinez Peria, Itai Agur, Anil Ari, John Kiff, Adina Popescu, Céline Rochon, Zoltan Jakab, 15 February 2019

Joshua Aizenman, 12 February 2019

The fall in valuation of Bitcoin has led to a debate over whether decentralised currencies can be reliably stable. This column argues that in contrast to the success of inflation-targeting regimes, there is no feasible path towards stability of a decentralised currency. The instability of cryptocurrencies is the outcome of a systemic 'tragedy of the commons' coordination failure. This is inherent in their design.

JT Hamrick, Farhang Rouhi, Arghya Mukherjee, Amir Feder, Neil Gandal, Tyler Moore, Marie Vasek, 09 January 2019

The surge of interest in cryptocurrencies has been accompanied by a proliferation of fraud, largely in the form of pump and dump schemes. This column provides the first measure of the scope of such schemes across cryptocurrencies. The results suggest that the phenomenon is widespread and often quite profitable, and highlight the need for concerted efforts from industry and regulators to fight cryptocurrency price manipulation. 

, 22 October 2018

Blockchain technology has a real potential to be a catalyst in the world of finance, offering new ways to intermediate capital risk and incite change in the financial sector. That's what the audience heard at a CEPR conference held at ING's London headquarters. But how much of this new technology is really understood? And is there a danger that hype is overshadowing reality?

Linda Schilling, Harald Uhlig, 11 October 2018

The Bank for International Settlements has attributed the volatility of the price of Bitcoin and other cryptocurrencies to the lack of a crypto central bank. This column examines the implications of this and the increasing, but bounded, supply of Bitcoin for the cryptocurrency’s price. It also discusses how the price of Bitcoin interacts with monetary policy for traditional currencies.

Raphael Auer, Stijn Claessens, 09 October 2018

Cryptocurrencies are often thought to operate out of the reach of national regulation. This column argues that in fact their valuations, transaction volumes, and user bases react substantially to news about regulatory actions. Because they rely on regulated financial institutions to operate and markets are (still) segmented across jurisdictions, cryptocurrencies are within the reach of national regulation.

Lin William Cong, Ye Li, Neng Wang, 05 October 2018

Cryptocurrencies, tokens, and the blockchain technology upon which these platforms are built hold considerable potential for financial architectures. This column presents a dynamic asset valuation model of cryptocurrencies and tokens on blockchain-based platforms. Price dynamics in the model feature explosive growth of the user base after an initial period of dormant adoption, accompanied by a run-up of token price volatility, in line with existing evidence. The findings highlight how the value of the tokens depends on user base, the quality of the blockchain platform, and users’ expectations of future token price dynamics. 

Yukun Liu, Aleh Tsyvinski, 06 September 2018

Cryptocurrencies have received a substantial amount of attention over the past year. This column uses textbook asset-pricing methods to explore how cryptocurrency returns compare with those of traditional asset classes. Results show that cryptocurrency returns do not co-move with traditional assets, but that some cryptocurrency-specific factors – namely, momentum and investor attention – strongly predict their performance. 

Dirk Niepelt, 20 August 2018

The potential benefits and risks of digital central bank money for use by the general public have been widely debated. This column looks at one aspect that has been somewhat overlooked – the consequences of substituting outside for inside money. ‘Reserves for all’ could increase the incentive to extend credit but might undermine political support for implicit financial assistance to banks. However, the effects need not be disruptive. 

Sabrina Howell, Marina Niessner, David Yermack, 23 July 2018

Initial coin offerings, whereby a blockchain-based venture raises capital by selling cryptographically secured digital assets (or ‘tokens’), may represent a significant innovation in entrepreneurial finance. This column studies a sample of 453 tokens that completed ICOs to investigate what types of issuer and token are successful. Tokens that offer voluntary disclosure, credibly commit to the project, and signal quality or potential to create substantial value tend to be more successful, and a founder or CEO with an entrepreneurial professional background is also beneficial.

Michael Casey, Jonah Crane, Gary Gensler, Simon Johnson, Neha Narula, 16 July 2018

The idea of a new software system that powers a consensus-driven form of shared record keeping has already had a profound effect, encouraging rapid and substantial investment in what is now commonly referred to as blockchain technology. This column introduces the latest Geneva Report on the World Economy, which assesses the available evidence and likely impact for this technology across a wide range of applications and explores the potential use cases for the financial sector, and the ways in which the organisation of these activities may change over time.

Simon Johnson, 16 July 2018

Blockchain technology has the potential to be a catalyst for change to incumbent financial sector firms. In this Vox Talk, Tim Phillips talks to Simon Johnson, one of the authors of the latest Geneva Report on the World Economy which looks at the technology and its possible applications. 

Beatrice Weder di Mauro, 06 July 2018

Central banks are concerned about the impact of cryptocurrencies. In this Vox Talk, Tim Phillips talks to Beatrice Weder di Mauro about the sources of this concern, and whether the disappearance of cash and a desire to escape the zero lower bound will lead to central banks issuing their own digital currencies.   

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