7 Jul 2018
Should We Trust Cryptocurrencies ?
Session 24
Can cryptocurrencies be real currencies, and in this respect, fulfil three critical functions: a unit of account, means of exchange, and store of value? Bitcoin and its ilk certainly do not meet these requirements. The boom and then sharp drop in their “exchange rate” in late 2017 and early 2018 were largely due to a preference for anonymity and a disturbing speculative crypto-madness. So why are certain regulators (like China) adopting draconian measures against these currencies, while others are accepting the introduction of trading desks in certain banks, the creation of financial products and the introduction of forward contracts? And why are certain central banks contemplating the creation of cryptocurrencies?
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The crypto-confusion reigning over these currencies comes from the confusion between their form (electronic vs scriptural or physical) and their transfer mechanism, which uses a decentralised register technology (such as blockchain). Numerous questions remain. Can or should private currency issuers be authorised? What will become of monetary policy? Will virtual currencies’ exponential calculation power requirements, and thus their enormous energy consumption, impede their growth?
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