I discuss private and central-bank-issued digital currencies, summarizing my prior research. I argue that prices of private digital currencies such as bitcoin follow random walks or, more generally, risk-adjusted martingales. For central bank digital currencies, I argue that they enhance the...

It is difficult for private agents to produce money that circulates at par with no questions asked. We study two cases of privately-produced money: pre-Civil War U.S. private banknotes and modern stablecoins. Private monies are introduced when there are no better alternatives, but they initially...

We provide a first look into the drivers of household cryptocurrency investing. Analyzing consumer transaction data for millions of U.S. households, we find that, except for high income early adopters, cryptocurrency investors resemble the general population. These investors span all income...

We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these...

Interest in central bank digital currencies (CBDCs) has been burgeoning with 134 countries now exploring its implementation. In December 2022, India started its CBDC pilot program to continue its transition towards a digitized payments economy. This paper presents the first empirical analysis...

Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its...

Stablecoins are cryptoassets which are designed to be pegged to the dollar, but are backed by imperfectly liquid USD assets. We show that stablecoins feature concentrated arbitrage: the largest issuer, Tether, only allows 6 agents in an average month to redeem stablecoins for cash. We argue that...

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the...

Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing...