Monetary Innovation and Financial Architecture | Money Markets Conference 2025

The presentation provides a rigorous theoretical framework for understanding the implications of monetary innovation on financial architecture. Allen’s model is well-structured, incorporating key features such as convenience yields, endogenous leverage, and bailout expectations. The empirical motivation, citing the growth of non-banks and stablecoins, grounds the theory in current developments. The model’s predictions are intuitive: public money creation (CBDC) improves efficiency by reducing the monetary premium, while private money creation (stablecoins) can have ambiguous effects depending on the competitive dynamics. The analysis of non-banks’ capital structure, based on empirical work, adds depth. However, the presentation is a conference talk, so the model details are not fully elaborated, and the welfare analysis is simplified. The reliance on a money-in-utility function is a standard but debated approach. The policy implications are relevant, particularly the discussion of bank subsidies and the need to regulate non-banks. The talk does not address potential risks of CBDCs, such as bank disintermediation, in depth. Overall, the content is of high quality, but the format limits the depth of the analysis. The title accurately reflects the content, and the presentation is well-organized.

The title accurately reflects the content, which discusses monetary innovation (CBDCs, stablecoins) and its impact on financial architecture.

8/10

Presentation by a renowned economist at an ECB conference, based on a formal model with empirical motivation. The talk is rigorous but not peer-reviewed in this format.

Markers derived by PSI from the transcript: the creator did not define chapters.

• 00:00Introduction and session overview
• 02:00Overview of cryptocurrencies and stablecoins
• 05:00Discussion of CBDC implementations and China's e-CNY
• 10:00Introduction to the model: banks vs non-banks, convenience yields
• 15:00Model setup: endogenous leverage and monetary services
• 20:00Equilibrium analysis: money supply and demand
• 25:00Welfare effects of public and private monetary innovation
• 30:00Numerical illustration calibrated to the US
• 35:00Policy implications and discussion

• Money Markets Conference 2025 programme — Official conference programme
• All sessions playlist — Video playlist of the conference

• ECB report on the digital euro — ECB's official page on the digital euro project