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The high velocity of digital assets as programmable money, and/ or as a security that can be pledged as collateral, offer a way for central banks to rely less on traditional money metrics as a monetary policy tool; if this holds true when applied to traditional finance, then what’s old in monetary policy may become new again.
The digital asset world has been talking about programmability for years, and mainstream financial players are now connecting the dots about its importance. Why? Because programmable digital assets exhibit high velocity, potentially exceeding that of traditional money in some jurisdictions. Amid the collapse in recent years of the velocity of traditional money, as QE and similar programs have expanded reserves on central banks’ balance sheets that remain mostly dormant, the rise of high-velocity, programmable money could pose important implications for monetary policy.
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