Platforms, Tokens, and Interoperability

Markus Brunnermeier and Jonathan Payne
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Jonathan Payne: Princeton University

Working Papers from Princeton University. Economics Department.

Abstract: Digital money requires a ledger. By integrating this ledger with its other ledgers, a platform can enforce repayment of uncollateralized credit, beyond the ability of the banking sector. However, by controlling interoperability to other platforms' ledgers, an incumbent platform can "lock-in" customers and increase its market power. Open banking, which gives users control of interoperability, limits uncollateralized credit. Introducing CBDC as digital legal tender (on an isolated ledger) hurts credit extension, but enhances it when combined with an open architecture public ledger as a "smart CBDC."

Keywords: Tokens; ledgers; interoperability; smart contracts; platforms; open banking; open architecture; financial inclusion; "smart CBDC"; "PlatFi" (search for similar items in EconPapers)
JEL-codes: E50 E59 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-fle, nep-pay and nep-reg
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