The main theme in Awrey’s excellent book is that, not for the first time in the history of financial markets, technological innovation is generating financial structures which are inherently unstable. True, banks remain at the core of the system, benefiting from four important safety nets, which also double up as barriers to entry: the access they have to emergency lending facilities at central banks, prudential regulation and supervision, bank resolution frameworks, and the partial protection available to their depositors from deposit insurance.

However, rising computer power and storage facilities means that the incumbents are under attack. The list of alternative payments systems is already long: PayPal, Venmo, WeChat Pay, Bitcoin, Tether and USDC are leading examples, but there are probably hundreds more.

Of course, there have been ‘shadow’ banking systems as long as there have been banks. However, Awrey argues that this time really is different. In the past, the shadow monetary system has been the domain of banks and other sophisticated financial institutions, who were able functionally to replicate the core legal privileges enjoyed by banks and their depositors. This is no longer the case.

Technological advances have allowed the new entrants to access a new universe of players - basically ‘us’. However, these institutions are not subject to regulatory frameworks which insulate their customers from the consequences of default and bankruptcy. At the same time, the banks have been slow to adopt the potentially transformative payment technologies exploited by the new outsiders, limiting their ability to provide meaningful benefits to their customers. The safety nets discussed above impede competition and innovation. This stimulates activity for the new entrants, hence providing a contemporary application of Gresham’s law.

Awrey approaches this challenge from a legal perspective and sets out a three-pillar blueprint for a more stable and competitive financial system. First, a dedicated payments charter would be available to all financial institutions which issue monetary IOUs in connection with their core businesses, but only through a ring-fenced subsidiary which would be barred from financial intermediation.

Second, these subsidiaries would have automatic access to central bank reserve accounts, with all customer accounts deposited into them. Access would be a first step to access to clearing houses, financial communication networks and electronic payments infrastructure. Owners of the infrastructure would be obligated to eliminate technological and operational barriers which might prevent access to their networks.

Third, he recommends a new governance structure for the payments system. At present, only a small number of public and private sector stakeholders are involved in decisions about such systems. Awrey recommends that this largely closed system be replaced by a more formal and representative governance structure, designed to harness the different comparative advantages of stakeholders and coordinate decisions more transparently in the public interest.

Awrey recognises the challenges of implementing such a framework. His main concern is to get his ideas into the public domain, not to provide the details of implementation. In this respect, his book succeeds. It is clearly written, and covers a lot of legal, economic, historical and technological ground in a style accessible to the general reader, and informative to those with greater expertise. Not all readers may agree with the conclusions or some of the claims made in passing, but they would still benefit from the wealth of knowledge presented to support them.