Jason Furman's Reviews > The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance

This was exactly the book I wanted and needed on Fintech, cryptocurrencies and Central Bank Digital Currencies (CBDCs). It is comprehensive, balanced, and covers most every aspect from the range of Fintech companies to how cryptocurrencies work and their pros and cons, to how CBDCs work to their macroeconomic, international financial and regulatory implications. Ultimately the book is a very optimistic take on the general area of not many of the specific technologies (like Bitcoin) with Prasad concluding, “Financial technologies are opening up a wide vista of possibilities for improving the economic condition of humanity, especially that of the poor and economically marginalized.”

Prasad, however, does a lot more listing of pros and cons than he does of making a strong argument. I mostly appreciated that because it is a hard topic without obvious answers, it gave me a lot of the points I needed to understand better to make up my own mind (and I still have not, at least not fully), and also the answer varies so much from country to country: “A cost-benefit analysis of CBDC introduction involves a complicated calculus that hinges on a country’s particular circumstances—including the quality of its macroeconomic policies and institutions, its level of development, and the structure of its financial markets.”

Broadly Prasad's sensibilities and concerns are similar to mine although he offers more of a defense of cash on privacy grounds and more criticism of digital money and especially CBDCs on those grounds than resonated with me. He also is detailed about the downsides of Bitcoin including fluctuating value, crummy medium of exchange, vulnerability to hacking/losing/locking, mirage of anonymity, environmental transactions and illegal transactions. But he seems insufficiently alarmed about the bubble and that many of its victims could end up being the less sophisticated, potentially those with lower incomes, and those who financial inclusion was supposed to help. Also at times he talks about products that are still quite tiny but talks about millions or billions of dollars without giving the denominator against which they should be judged.

Perhaps the book's greatest strength is its discussion of the many different ways that country's are approaching CBDC's, what has been learned from them so far, and the considerations going forward. This account is exhaustive but rarely exhausting (OK, maybe I didn't need to know about the Marshall Islands' CBDC). He lays out the different types of CBDC (like Venmo, a Central Bank bank account and an official cryptocurrency that does not trade at par), the advantages they have (financial inclusion and payments system--plus reducing money laundering and other illegal activities) and also the disadvantages (draining money from banking system and potentially contributing to instability, stifling innovation, and reductions in privacy). Prasad has a lot of thoughtful ideas on how they can be structured.

Ultimately he makes a strong argument that CBDCs are only as strong as a country's institutions. Where they are not trusted (like Ecuador) they fail, where they are (like Uruguay). But overall Prasad, probably correctly, finds the most promise for CBDCs in emerging market economies: “The Fintech revolution provides an opportunity for [Emerging Market Economies] and other developing economies to leapfrog wealthier economies by rapidly adopting new and more efficient ways of conducting banking and financial transactions. It is sometimes easier for new technologies to take shape on a tabula rasa—a blank slate—rather than in a context where they must overcome resistance from vendors and end users of older technologies.”

Perhaps the only thing I missed in this book was the antitrust/competition angle. How much of a role should big tech play? Should big finance play? Does the government have a role in leveling the playing field to enable competition? Are open standards needed? Or is this all about startups and there is lots of vigorous competition already? I admit I am particularly interested in these issues, would have loved to read more.

Prasad does not have a bottom line. I don't think I have complete conviction about one either except that for the United States would do more to prevent cryptocurrencies and other DeFi products from benefiting from regulatory and tax arbitrage and would do more for consumer protection. On a CBDC, I think the Fed can afford to move slowly and carefully, see what happens in other countries, but ultimately it should probably be more in the business of improving its wholesale backbone so that different digital retail solutions can be built on top of it.

Overall, very grateful for this careful, detailed, up to the minute book and the wide range of thinking and topics that went into it--mostly I just wanted a little more.