Systemic Regulation of Artificial Intelligence

Dec 28, 2023 ·

This paper discusses the implications of cryptocurrency on global financial stability. It examines how digital currencies can impact international capital flows, the balance of payments, and macroeconomic fundamentals such as inflation and productivity. It also explores potential risks associated with increased adoption of digital currencies by investors, including liquidity risk, counterparty risk, asset concentration risk, and price volatility. The paper concludes that while digital currencies offer many potential benefits, they can also pose significant risks to global financial stability if not managed properly. In particular, it cautions against relying solely on cryptocurrencies for risk mitigation strategies, highlighting the need for policy makers to be aware of the potential risks associated with such investments. Finally, the paper outlines several possible regulatory approaches to ensure safe and efficient use of digital currencies.