This chapter looks at how new forms of digital money – in particular stablecoins, digital banknotes (retail central bank digital currencies or CBDC), and crypto currencies (Bitcoin) – impact the ability of the central bank to effectively implement monetary policy. This chapter first illustrates how central banks typically steer market interest rates to the desired level. It then shows how these new forms of money change the balance sheets of the central bank, commercial banks, and households and firms. We find that impact of stablecoins, retail CBDC, and cryptocurrencies on the effectiveness of monetary policy appears to be modest. Since retail CBDC will reduce the deposits at commercial banks, the central bank may have to increase its lending to them to keep the credit provision to the economy at the previous level.

The initial title of this chapter was “Will the U.S. Security Law Lead Cryptoassets Regulation?”, because I was quite confident it would do. Then, the exploration of this topic in different jurisdictions questioned my belief. The US was not properly leading the regulatory intervention and neither Europe nor UK, which are the jurisdictions part of my analysis. The key element that was missing in all the three regulatory frameworks was a global vision. Crypto-assets run on the Internet, which has no geographic boundaries. As a consequence, a crypto-asset regulation cannot be developed in isolation. However, there are important lessons that can be drawn from the experience of each jurisdiction singularly taken.

Chapter 6 discusses MiCA’s bespoke product regulation for so-called stablecoins under the labels of ARTs and EMTs. Section 6.2 lays out the scope of Titles III and IV MiCA, after which Section 6.3 discusses the licensing requirements forming the basis for the token issuer’s European Passport. Section 6.4 then covers the rules on redemption rights and reserve management, while Section 6.5 addresses disclosure requirements. Section 6.6 lays out the EBA’s supervision of significant ARTs and EMTs, and Section 6.7 concludes.

Cryptocurrencies are reshaping money and payment systems in unprecedented ways. Catalysts include the launch of Bitcoin in 2009, the evolution of decentralised and centralised technologies, the announcement of Libra in 2019, the ongoing live trials of China’s Digital Yuan, and the COVID-19 pandemic and the related move to presenceless payments.This chapter considers the policy issues and choices associated with cryptocurrencies, stablecoins, and central bank digital currencies (‘CBDCs’) and emphasises that there is no single model for CBDC design. The catalysts reshaping monetary and payment systems challenge regulators. While Bitcoin and its thousands of progenies could be ignored safely by regulators, Facebook’s proposal for Libra, a global stablecoin (‘GSC’), brought an immediate and potent response from regulators globally. This proposal by the private sector to move into the traditional preserve of sovereigns– the creation of currency– was always likely both to trigger such a regulatory response and the development of CBDCs by central banks. China has moved first with its e-CNY– an initiative that may, in time, provoke a chain of CBDC issuance around the globe.

This contribution discusses some critical aspects of the upcoming Markets in Crypto-assets (MiCA) Regulation. There is already extensive and comprehensive literature on the MiCA proposal, and the scope of these brief notes is to consider some – necessarily not all – of the issues that MiCA (as it stands in the original proposal) raises, and that might be considered in the next steps of the legislative process. In particular, we discuss the relationship between MiCA and MiFID-Prospectus rules, the issues raised by DeFI, tokenisation of assets, and some general commercial and civil law aspects.