American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
On the Programmability and Uniformity of Digital Currencies
American Economic Review: Insights
(pp. 124–43)
Abstract
Central bankers argue that programmable digital currencies may compromise the uniformity or singleness of money. We explore this view in a stylized model where programmable money arises endogenously, and differently programmed monies have varying liquidity. Programmability provides private value by easing commitment frictions but imposes social costs under informational frictions. Preserving uniformity is not necessarily socially beneficial. Banning programmable money lowers welfare when informational frictions are mild but improves it when commitment frictions are low. These insights suggest that programmable money could be more beneficial on permissionless blockchains, where it is difficult to commit but trades are publicly observable.Citation
Chiu, Jonathan, and Cyril Monnet. 2026. "On the Programmability and Uniformity of Digital Currencies." American Economic Review: Insights 8 (1): 124–43. DOI: 10.1257/aeri.20250119Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- E52 Monetary Policy
- E58 Central Banks and Their Policies