A research consultant for Canada’s central bank has published a new research paper that envisions a world that has established a monetary standard based on bitcoin.

The outcome, speculates author Warren Weber, would be a mix of good and bad in terms of impact on monetary policy.

Weber writes:

“A bitcoin standard would have two major benefits over current fiat money standards. One is that there would be greater price-level predictability due to the known, deterministic rate at which new bitcoins are created. A second is that the resources currently devoted to hedging against fluctuations in exchange rates would be freed up to be used in more productive ways.”

Yet, there would be costs, according to the paper (which, as its author states, does not reflect and opinion or policy position of the Bank of Canada), namely a loss in control of central banks, which would have fewer policy levers to pull without the aid of a fiat currency like the US dollar.

This, argues Weber, is why central banks and governments would prevent such an outcome from occurring in the first place.

“One [reason] is to protect the seigniorage revenues that they obtain from the ability to almost costlessly create money,” Weber writes. “The second is to retain the ability to implement interest policies to affect their domestic economies. Governments would lose the ability to do either or both of these under the bitcoin standard.”

Read Weber’s full paper here.

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