Central Bank and Cryptocurrencies The pursuit of a lower fiscal dominance

Vila-real y Alicante

Congreso; Arnoldshain Seminar XVII and 9th Meeting on International Economics; 2022

Universidad Jaume I y Universidad de Alicante

The possibility of a regionalized Central Bank creating its cryptocurrency is analyzed in thepaper. This would allow imposing limits both on the discretionary conduct of monetary policyby a wet-type Central Bank, as well as on the government?s possibility of extracting seigniorageand borrowing, reducing fiscal dominance. In this way, it contributes to the goal of creatingstrong and independent public institutions.Banks will continue having a role, although this will require a process of transformation andadaptation to the characteristics of the new monetary system. And FinTechs will be able tostrengthen their position in the economy, both as institutions providing credit and in their roleas suppliers of innovative financial assets.The implementation of monetary policy in different scenarios is also analyzed, recognizing thatthere will be impacts in the economy, in general, and in the financial system, in particular.