that is the digital analogue of dollarization. 15 large - scale stablecoin use could also affect larger, advanced economies with extensive connections to the global financial system, including by increasing market volatility and by transmitting shocks across borders. finally, there are likely to be financial stability risks for a stablecoin network with global reach. if not managed effectively, liquidity, credit, market, or operational risks — alone or in see, e. g., https : / / www. jpmorgan. com / global / news / digital - coin - payments and https : / / newsroom. wf. com / pressrelease / innovation - and - technology / wells - fargo - pilot - internal - settlement - service - using. see, e. g., christine lagarde, “ central banking and fintech — a brave new world? ” ( speech delivered at the bank of england conference, london, september 29, 2017 ), https : / / www. imf. org / en / news / articles / 2017 / 09 / 28 / sp092917central - banking - and - fintech - a - brave - new - world. - 9combination — could trigger a loss of confidence and a classic run. a global stablecoin network raises complicated issues associated with many legally independent but interdependent operations, and the lack of clarity about the management of reserves and the rights and responsibilities of various market participants in the network. the potential for risks and spillovers could be amplified by potential ambiguity surrounding the ability of official authorities to provide oversight and backstop liquidity and to collaborate across borders. central bank digital currencies even before the advent of stablecoins, the rapid migration of payments to digital systems prompted interest in the issuance of central bank digital currencies. in some jurisdictions, there has already been a pronounced migration from cash to digital payments, which naturally prompts monetary authorities to explore moving to digital issuance of their own. the potential for global stablecoin systems has intensified the interest in central bank digital currencies. proponents argue that central bank digital currencies would be a safer alternative to privately issued stablecoins because they would be a direct liability of the central bank. 16 for instance, markus brunnermeier, harold james, and jean - pierre landau provide important arguments. 17 of course, the federal reserve and other central banks already provide money digitally in the form of central bank

illicit activity. if it is designed to be financially transparent and provide safeguards against illicit activity, a central bank digital currency for consumer use could conceivably require the central bank to keep a running record of all payment data using the digital currency — a stark difference from cash, for instance. a system in which individual payments information would be recorded by a government entity would mark a dramatic shift. a see https : / / www. federalreserve. gov / paymentsystems / coin _ data. htm. see, e. g., cpmi and markets committee, central bank digital currencies, march 2018, https : / / www. bis. org / cpmi / publ / d174. pdf. - 11 related question is whether the federal reserve has the authority to issue currency in digital form and, if necessary, to establish digital wallets for the public. there could also be profound monetary policy implications. some economists have argued that a central bank digital currency could address the problems posed by the zero lower bound by potentially transmitting monetary policy directly to the public. executing monetary policy in such a manner would effectively imply the elimination of all physical cash and the power to impose a negative rate, or a tax, on households ’ holdings of digital money. my own strong preference is to address the effective lower bound by using our existing tools vigorously, since i view the cost - benefit assessment of negative rates as unattractive for the current u. s. context. financial stability considerations are also important. the ability to convert commercial bank deposits into central bank digital currency with a simple swipe surely has the potential to be a run accelerant. here, too, the role of banks in providing financial intermediation services could be fundamentally altered. finally, there could be operational risks to introducing a central bank digital currency. for starters, this might require the federal reserve to develop the operating capacity to access or manage individual accounts, which could number in the hundreds of millions. a myriad of other operational challenges would need to be addressed, including electronic counterfeiting and cyber risks. it is worth noting that the technologies used currently for private - sector digital currencies do not provide the same level of information technology reliability, integrity, and scalability as - 12 central bank systems in use today. many of these technologies do not provide for clear, predictable, and final settlement, which is a core tenet of payment systems. 20 that said, some jurisdictions may move