The Money Dialogues

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The Money Dialogues

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Bibliographic details

• Authors: TOMMASO MANCINI-GRIFFOLI
• Published: September 3, 2025

Overview

• Format: A conversational piece imagining three friends—Optimus (technology-optimist), Stabilius (skeptic), and Vastus (big-picture thinker)—debating money, innovation, and stability.
• Author and date: TOMMASO MANCINI-GRIFFOLI, September 2025.
• Core focus: Stablecoins, tokenized deposits, central bank digital currency (CBDC), and digital financial infrastructure (blockchains and digital wallets).
• Setting and framing: A narrative dialogue that surfaces trade-offs between innovation, convenience, financial stability, and public-policy roles.

Stablecoins and payment innovation

• Functional description:
  • Stablecoins: payment instruments denominated in dollars, euros, yen, and potentially other currencies; recorded and transferred on blockchains.
  • Wallet providers: separate digital wallet providers onboard customers and build apps; stablecoin issuers can leave front- and back-end services to others.
  • Tokenized deposits and asset managers: banks and asset managers are exploring ways to make deposits and other assets available on blockchains; money market funds and asset managers are starting to offer investment products, like exchange traded funds, on blockchains.
• Adoption and scale:
  • Stablecoin companies have racked up millions of users globally, transacting across borders around the clock at fairly low cost, and they can scale up.
  • Such global scale and low-cost cross-border, 24/7 transactions were barely possible even five years ago.

Stability, reserves, and runs

• Reserve backing and value risks:
  • The value of stablecoins fluctuates with the value of the assets held by the issuer as reserves.
  • Treasury bills are named as “good backing assets,” but their prices vary as interest rates move.
• Run risk and comparative safety:
  • Private money has historically experienced runs; when reserves’ prices decrease users might run from stablecoins—especially if they question the exact assets held.
  • Bank deposits are noted as also risky, since not all deposits are insured.
  • Stablecoin issuers could hold extra capital as backup or hold safer, more liquid assets like central bank reserves.
• Regulatory responses:
  • Policymakers have been motivated to phase in laws and regulations to make stablecoins safer.
  • Compliance with “know your customer” and anti–money laundering requirements is discussed as depending on country laws and regulations.

Currency risks, dollarization, and domestic policy

• Risks for small/weak-currency jurisdictions:
  • Citizens in countries with high inflation, weak currencies, or poor payment systems may adopt stablecoins (an accessible dollar), which can individually benefit users but collectively risk draining bank deposits and undermining central bank monetary policy and financial stability.
  • Key policy question posed: “What’s the point of setting interest rates on a currency no one uses?”
• Possible domestic measures:
  • Countries could require stablecoins to be held in domestically regulated wallets with limits on holdings.
  • Enforcement challenges: people can hide their computer’s location; enforcement is hard in a borderless market.
  • Technology could both evade and enforce limits; cooperation from stablecoin issuers with country authorities is necessary but not guaranteed.

Interoperability, fragmentation, and CBDC interaction

• Fragmentation problems:
  • Difficulty exchanging one stablecoin for another when backed by different asset pools or recorded on incompatible blockchains; solutions exist but may be clunky and costly.
  • Antitrust concern: persuading everyone to hold the same coin could create concentration problems.
• Central bank reserves and on-chain settlement:
  • Banks use central bank reserves as a common, safe asset to settle payments; making central bank reserves available on-chain to stablecoin issuers could ensure interoperability.
  • Fully backing stablecoins with central bank reserves approaches the concept of exchanging stablecoins for CBDC.
• Proposed hybrid approach:
  • Leave money creation to central banks, but allow private firms to distribute and innovate around transaction and service delivery—“CBDC built for integration and innovation.”
  • Central banks could provide incentives to foster private-sector innovation while ensuring safety and oversight.

Digital infrastructure, blockchains, and governance

• Blockchains as payment “roads”:
  • Blockchains can record money and securities on the same ledger, enabling simultaneous delivery-versus-payment, automation, 24/7 trading, cross-border settlement, and fewer intermediaries.
• Concentration vs. diversity:
  • Risk of a single dominant national or regional blockchain; potential for dominant stablecoins to favor one chain and impose standards.
  • Competition among blockchains is healthy; different chains may be better for privacy, programmability, or speed.
• Compatibility and standards:
  • Compatibility—code and contracts that run across chains—reduces fragmentation and concentration risks.
  • Central banks could act as catalysts for a blockchain standard if central bank money is required on-chain for settlement.
• Decentralized models and practical concerns:
  • Open-source, decentralized ownership could avoid single-entity control while enabling scale and innovation.
  • Practical issues raised: customer service expectations, governance arrangements of decentralized communities, cyber risks when jumping chains.
  • Governance, privacy, and enforcement remain key unresolved areas; potential solutions include wallets, brokers, or issuers providing customer-facing support and hard-coded transaction rules in assets.

Scenarios and trade-offs highlighted

• Scenario: Privately issued, reserve-backed stablecoins scale globally
  • Benefits: low-cost, instant, scalable cross-border payments; integration with wallets and apps; new financial products on blockchains.
  • Risks: runs on private money, reserve-value fluctuation, fragmenting monetary sovereignty, undermining central bank policy.
• Scenario: Central banks provide on-chain reserves or issue CBDC interoperable with private infrastructure
  • Benefits: interoperability, safe settlement asset, ability to preserve monetary sovereignty while enabling private innovation.
  • Risks/concerns: central bank reluctance to immobilize reserves; private firms’ business models and revenue sources may be challenged.
• Scenario: Decentralized open-source blockchains with broad participation
  • Benefits: reduced concentration, wide innovation community, no single payer for infrastructure.
  • Risks: governance, customer support expectations, cyber security, legal and regulatory clarity.

Policy implications and recommendations emerging from the dialogue

• Strengthen regulation and supervision:
  • Phase in laws and regulations to make stablecoins safer; ensure supervision and enforcement to curb illicit use.
  • Require compliance with “know your customer” and anti–money laundering frameworks as per domestic law.
• Preserve monetary stability and monetary-policy effectiveness:
  • Consider limits or domestic-regulation measures (domestically regulated wallets, holding limits) to limit domestic dollarization risks.
  • Explore using central bank reserves or CBDC on-chain to provide a common safe asset for settlement and interoperability.
• Foster interoperable standards and legal foundations:
  • Promote compatibility across blockchains, and consistent legal and regulatory foundations across countries to mitigate fragmentation.
  • Central banks may play a role in vetting stability and compatibility, and could catalyze common standards without stifling private innovation.
• Balance innovation with public safety:
  • Allow private firms to innovate in distribution and services while reserving money creation to central banks to maintain systemic safety.
  • Use incentives and cooperation to align private-sector incentives with public-policy objectives.
• Address governance, privacy, and customer service:
  • Develop arrangements for governance of decentralized systems, customer-facing accountability (wallets, brokers, issuers), and clear rules embedded in digital assets.

Source: The Money Dialogues, TOMMASO MANCINI-GRIFFOLI, September 2025.

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• The Money Dialogues
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  • The Money Dialogues (PDF)