Remunerating Means of Payment (Bruegel)
Bruegel published a paper by Ulrich Bindseil that concludes that regulatory constraints on remunerating electronic means of payments are either ineffective or undermine financial stability and efficiency. No economic theory of the interest-rate spread between money and adjacent financial assets implies that means of payment must be unremunerated. Furthermore, enforcing non-remuneration acts as a regressive tax proportional to nominal interest rates, transferring wealth from users to issuers. Such constraints are easily circumvented, generating financial flows that could threaten market stability. Although some defend these restrictions as necessary to protect bank deposit franchises and systemic stability, the paper finds such claims insufficiently founded, serving only as temporary measures when superior regulatory tools are absent. Consequently, tiered remuneration for digital currencies should be adopted. [Bruegel]
BTW if you want to see a complete database of my DFC-related posts going back years, including many that didn’t make the Daily Digest cut, click here.
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