Technological Change and Central Banking

The decentralized autonomous organization (DAO) represents a radically new way to manage databases. Since money and payments are all about managing databases and since banks play a central role in money and payments, DAO-based money and payments systems are potentially a disruptive force in the banking system-which includes central banks. One would normally expect regulatory frameworks to evolve with a changing technological landscape. However, the decentralized governance structure characteristic of DAOs renders it near impossible to regulate these entities directly-a property that makes them ideal vehicles to exploit regulatory arbitrage. In this article, I discuss some of the monetary policy implications of DAO-based money and payment systems. I highlight the prospect of a globally accessible DAO-based stablecoin that may conceivably end up financing a large fraction of global trade. To the extent that such a structure imposes systemic financial risk and to the extent it cannot be regulated directly, an alternative strategy is to offer a competing product. A central bank digital currency accessible to firms involved in the global supply chain may be one way to mitigate the systemic risk associated with an emergent, unregulated global stablecoin.