Legal Seminar, Denver, CO

Safety/Soundness • Fiat currencies present benefits for government  finance, but they also present challenges for  regulation. – Stores of cash outside the banking system circumvent  intermediaries that governments tend to trust. – In the US, about 7 percent of GDP may be stored in cash.   Most of this is in $100 bills.  (2013 data from Rogoff – about $4k/everyone in the US).  Higher rates in E.U. – Privacy protections from stored cash make it attractive for  consumers  – but criminal activity may go undetected. – Large denomination bills may present biggest practical  threat due to size/volume considerations.

Safety/Soundness • Deposits implicate intermediaries and concerns about their  behavior (a topic thoroughly familiar to this group). – For insightful discussion of bank regulation on a comparative  basis, see Calomiris and Haber, Fragile by Design (2014).   • Electronic payments are potentially moving cash out of  circulation and into a regulated system (but not always). • Risks tend to be technological, rather than physical – Cash is immune from cyber threats. – Cash is immune from downed power lines, cables in natural  emergencies – But we must get to our cash stores – ATMs are also on networks