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Conference on the Foundations of Policy Toward Electronic Money

Federal Reserve Bank of Minneapolis
December 3-4, 1996
8:00 a.m. Continental breakfast
9:00 a.m. Session 1: Historical and Institutional Perspectives on E-Money
  Presenter: Art Rolnick, Federal Reserve Bank of Minneapolis
  Discussants: Stacey Schreft, Federal Reserve Bank of Kansas City, and Edward Stevens, Federal Reserve Bank of Cleveland
  Subject: Many of the issues raised by electronic money are of long standing, and we can learn from previous experiences with privately issued circulating media and with rapid technical change in the form of money. We also need a common understanding concerning the likely legal status and clearing arrangements for e-money. This session seeks to identify the relevant lessons from monetary history and to provide a basic legal and institutional perspective on e-money.
10:30 a.m. Coffee break
11:00 a.m. Session 2: Banking and Payments Systems Stability in an E-Money World
  Presenters: Jamie McAndrews and Leonard Nakamura, Federal Reserve Bank of Philadelphia
  Discussants: Joseph Haubrich, Federal Reserve Bank of Cleveland, and Ann Marie Kohlligian, Board of Governors of the Federal Reserve System
  Subject: Will widespread private issuance of e-money destabilize the banking or payments systems? Does it raise any new issues of systemic risk? Why or why not? How does the answer depend on whether e-money is issued by nonregulated entities, on whether deposit insurance is extended to the various e-monies, and on whether issuers have access to the discount window? What is the appropriate stabilizing role of supervision and regulation of e-money?
12:30 p.m. Luncheon
1:30 p.m. Session 3: Network Externalities and Public Goods in Payment Systems
  Presenter: John Weinberg, Federal Reserve Bank of Richmond
  Discussants: William Roberds, Federal Reserve Bank of Atlanta, and Ed Coia, Federal Reserve Bank of Philadelphia
  Subject: Does the emerging e-money technology exhibit network externalities that could cause private market equilibria to fail to deliver socially optimal allocations? Do network externalities inherently give rise to systemic risk? Should the public sector, including the Fed, intervene to alter the competitive outcomes or control systemic risk? What role will be played by the determination of technological standards for interoperability? Is there a need for a central repository of encryption keys? Should standards and key provision be viewed as a public goods and therefore also candidates for public provision? How can the Fed play an appropriate public and leadership role, and would this necessarily require the Fed to provide e-money or any other payments system services?
3:00 p.m. Coffee break
3:30 p.m. Session 4: Electronic Money and Monetary Policy
  Presenter: Jeff Lacker, Federal Reserve Bank of Richmond
  Discussants: David Marshall, Federal Reserve Bank of Chicago, and John Wenninger and John Partlan, Federal Reserve Bank of New York
  Subject: Implications of e-money for the central bank’s core responsibility of implementing a monetary policy conducive to long-term economic growth. A review of existing results regarding optimal monetary policy in the face of widespread provision of inside money, plus extensions where possible and application to specific e-money technologies. Discuss demand for inside and outside money, monetary control procedures and difficulties raised if private e-money displaces existing forms of money, issues of central bank independence, and seignorage.
5:00 p.m. Conference adjourns for the day
6:00 p.m. Cocktail reception
Wednesday, December 4
8:00 a.m. Continental breakfast
9:00 a.m. Session 5: International Supervisory and Monetary Policy Issues Raised by E-Money
  Presenter: Chris Cumming, Federal Reserve Bank of New York
  Discussants: Lewis Alexander, Board of Governors of the Federal Reserve System, and Heidi Richards, Board of Governors of the Federal Reserve System
  Subject:  E-money can cross borders easily, and e-money issuers are not tied to physical locations in the way that traditional brick-and-mortar banks are. Does this raise any new issues with regard to exchange rate movements, capital controls, FX clearing and settlement risks? Does it narrow the range of sustainable differences in economic policies across countries, such as by facilitating “dollarization” in countries with high inflation? What implications does this have for U.S. monetary policy, if any? How should home countries regulate foreign e-money issuers? What sorts of international cooperation are required to achieve efficient international regulation of e-money? Does game theory provide insights into the overall process of harmonizing multinational banking supervision and regulation, and does the U.S.’s go-it-alone posture of permitting nonbank issuance of e-money potentially upset a delicate balance of multilateral harmonization of banking regulation?
10:30 a.m. Coffee break
11:00 a.m. Session 6: Electronic Money and the Fed’s Role in Providing Payments Services
  Presenter: Ed Green, Federal Reserve Bank of Minneapolis
  Discussants: Bruce Summers, Federal Reserve Bank of Richmond, and Paul Connolly, Federal Reserve Bank of Boston
  Subject: Payments technologies may be changing rapidly, and many new products and markets may emerge. Which, if any, of these should the Fed compete in? What do our guiding documents and policies—the Federal Reserve Act, the Monetary Control Act, other legislation, our White Paper, Governor Blinder’s e-money testimony, etc.—imply about our role? Are the existing laws and policies appropriate? What problems might they cause, and how can we best deal with these problems?
12:30 p.m. Luncheon
1:30 p.m. Session 7: Panel Discussion of Implications for Decision Making (Panelists TBA)
3:00 p.m. Conference adjourns