The Implications of New Forms of Money for Financial Stability: Central Bank Digital Currencies and Stablecoins

Money plays a pervasive role in economic trade and finance, so it is to be expected that the introduction of new forms of money, while likely to further improve the efficiency and liquidity of the economy, also creates new risks. These risks must be understood and addressed. Two new forms of money that are currently emerging, central bank digital currency (CBDC) and stablecoins, still play a limited role in practice, but may become important in the medium to long term. The implications for financial stability have been widely discussed in the literature in recent years. In this article, we summarize this literature and draw conclusions about the nature, extent, and mitigation options for these risks to financial stability.