Economists have been dismissive of cryptocurrencies, but fintech entrepreneurs and enthusiasts continue to see their disruptive potential. This column considers the theoretical and practical arguments on both sides of the debate.
There is a stark contrast between the attitudes of fintech enthusiasts and economists towards cryptocurrencies. According to the former, cryptocurrencies are disrupting finance, privatising money, rendering old style banking and central banks irrelevant, enabling seamless, costless global transacting, and finally, democratising the financial system.
By contrast, economists tend to take a thoroughly sombre view, pointing out that “cryptocurrencies don’t make sense” (Danielson 2018), that bitcoin is an inferior form of money, the latest manifestation of a ‘Dutch tulip’ bubble, and its price susceptible to manipulation (Gandal et al.2017). Bitcoin’s blockchain has been described as the “most over-hyped technology of all times” (Roubini and Byrne 2018) in addition to being an environmental disaster.
But despite the potential, cryptocurrencies are now facing the reality of the insurmountable advantages of established currencies, and are failing to gain much traction as a means of payment. Moreover, regulators across the world are taking a closer look at the issuance of cryptocurrencies and some have moved to prohibit or curtail them.
But, despite this lack of success, there are other ways in which technology can disrupt money.
In particular, we see the growing expectation of faster and more efficient payment systems as a catalyst for innovation.
This innovation will leave currencies as we know them but might redefine the way in which money balances are created and accessed as a means of payment.
Full article
© VoxEU.org
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article