There is yet any official guidance on the financial reporting of Bitcoin transaction from the standard setters as the crypto-currency become increasingly popular and tax accounting guidance begin to appear in 2014. Designed as a decentralized currency, Bitcoin will not become a reporting currency and will instead complement fiat money. We argue that the accounting principle of faithful representation requires interpreting the economic substance for financial reporting that varies with reporting entity: trading firms recognize Bitcoin like a foreign currency and measure the revenue, or expense, at the equivalent amount of the reporting currency; digital currency exchanges recognize Bitcoin as goods in line with tax accounting treatment. An Economica paper by Radford (1945) describing cigarette being used as commodity money in a POW camp has alluded to this economic basis. This paper applies accounting principle to a practical issue and contributes to the thinking process which may help standard setter issue an interpretation.
Despite the predominance of liberal ideology in the United States since its formation as an independent nation, the US has consistently expanded its capacity to finance and support the efforts of the private sector to create and commercialize new technologies in strategic sectors. As such, this study aims to identify and describe the characteristics of interventions by the American state to foster economic development. It also seeks to analyze how these characteristics fit within the different typologies of the Developmental State. A case study was conducted on the nanotechnology sector in the US, complemented by mini case studies on the computation, semiconductor, and biotechnology sectors. The empirical findings were compared to the ideal types of the Regulatory State, the Developmental Bureaucratic State, and the Developmental Network State. These ideal types were constructed using the Weberian model using concepts from the literature pertaining to the Developmental State. This study concludes that the American Developmental State has adopted a model that is closely related to the Developmental Network State, acting in a fragmented and decentralized manner, dedicated to promoting collaboration and joint action with the private sector. This is in line with the triple helix model (industry, academia, and government) with the intention of fostering development and growth of high-technology sectors, which are considered economically, scientifically, or militarily strategic. Furthermore, the State also carries out various actions designed to facilitate transforming technological innovations into commercialized products, with the idea of ensuring the country's scientific and technological leadership, its international competitiveness, the vitality of its domestic industry, and the dynamism of the national economy.
This paper explores the recent development of digital currenciesâcurrencies which are creatures of the Internet, self-authenticating, and usable worldwide by members of the general public to engage in the same types of direct, one-to-one transactions that daily occur using government-issued currencies. At present, the most developed digital currency measured by market capitalization is Bitcoin, which will be used as a proxy for the general phenomenon. Not surprisingly, as Bitcoinâs circulation and visibility has increased, so have the number of practical and legal issues surrounding its use. Some of these will be explored in this paper, with a view to considering the utility and viability of such currencies for widespread, global use.
A private initiative that has created a virtual currency and a payment system based on cryptography and decentralized management, Bitcoin is considered not only an interesting, but also a disruptive technical innovation by many observers. A number of regulatory and supervisory bodies have issued assessments of the phenomenon, contributing to an emerging international discussion. Does Bitcoinâs claim to provide useful monetary and payment services hold up when checked against principles of monetary theory and the economics of payment systems? We find that while Bitcoin does not rival the established money and payment systems in their traditional domains, a complementary function is conceivable in niches. Using the Bitcoin network poses several risks to customers, however. Since this network and financial services related to bitcoins are not regulated, costumers must take appropriate technical measures to protect their bitcoin holdings. In case of error and fraud, payments are difficult to reverse. Furthermore, the significant exchange rate fluctuations could pose a grave risk to bitcoin ownersâ wealth and discourage widespread use for monetary purposes. In a nutshell, at present, bitcoins can be regarded as speculative assets, and the Bitcoin network might inspire further innovation in payment systems and other applications.
This paper discusses the potential and limitations of Bitcoin as a digital currency. Bitcoin as a digital asset has been extensively discussed from the viewpoints of engineering and security design. But there are few economic analyses of Bitcoin as a currency. Bitcoin was designed as a payments vehicle and as a store of value (or speculation). It has no use bar as money or currency. Despite recent enthusiasm for Bitcoin, it seems very unlikely that currencies provided by central banks are at risk of being replaced, primarily because of the market price instability of Bitcoin (i.e. the exchange rate against the major currencies). We diagnose the instability of market price of Bitcoin as being a symptom of the lack of flexibility in the Bitcoin supply schedule â a predetermined algorithm in which the proof of work is the major driving force. This paper explores the problem of instability from the viewpoint of economics and suggests a new monetary policy rule (i.e. monetary policy without a central bank) for stabilizing the values of Bitcoin and other cryptocurrencies.
Bitcoin has enabled competition between digital cryptocurrencies and traditional legal tender fiat currencies. Despite rapidly increasing acceptance, so far the affirmation of cryptocurrency as better money has been thwarted by dramatic deflationary price instability. Successful at disposing of any central monetary authority, bitcoin has elected to have a fixed deterministic inelastic monetary policy, establishing itself more as digital gold than as a currency. Price stability could be achieved by dynamically rebasing the outstanding amount of money: the number of cryptocurrency units in every digital wallet is adjusted instead of each single unit changing its value. The apparent awkwardness of this unfamiliar paradigm is discussed at length, proving that its only real novelty is about fairness and effectiveness. Furthermore, suggestions are provided about how to ease the effect of contractionary monetary policy. The proposed monetary base adjustment has neutral impact on the overall wallet wealth, as it does not introduce any arbitrary distortion into the intrinsic value dynamics of the wallet. The adjustment is based on a commodity price index determined with a resilient consensus process that does not rely on central third party authorities. It is posited in this paper that a digital cryptocurrency adopting elastic monetary standard is Hayek Money, so named from the Nobel Prize-winning economist: a good money standard providing stable prices for a new economic era.
At present, bitcoin is held mostly as a speculative vehicle, little used to pay for goods and services. Its value has been unstable, which impedes bitcoinâs wider use as a payment medium. We explain why the value of bitcoin has been so unstable. Then, we discuss entrepreneurial efforts that might enable bitcoin to become a more commonly accepted payment medium.
Digital payment schemes show an ever increasing importance. Out of the countless different schemes available this article focuses on the popular Bitcoin system. The authors provide a description of Bitcoin's unique technological basis and its accompanying ecosystem of users, miners, trading platforms and vendors. Furthermore, this article discusses Bitcoin's currency-like features and the first regulatory actions take in the European Union and in the United States of America.
The virtual currency and payment project Bitcoin intends to challenge the current monetary and payment system that finds itself in a legitimacy crisis in the aftermath of the financial market turmoil of 2008. In examining the governance of the Bitcoin system, I try to assess its potential to create input and output legitimacy as a payment system and as a monetary system in comparison with current practice.
Technological development and the increased use of the internet have led to the proliferation of virtual communities. Some of these communities have created and circulated their own currency for exchanging goods and services. Bitcoin is currently the most popular among these virtual or digital currencies and has been in news recently because of the wild fluctuations in its âvalueâ and also significant venture capital investment in entities associated with it.1 Bitcoin is relevant in several areas of the financial system and is therefore of interest to central banks, consumers and investors. Digital currencies are part of a broader group of virtual currencies that include credit card points, air miles, loyalty points and coupons (Chart 1). With the advent of the Internet, mobile devices and detailed consumer information, companies are increasingly using digital currencies as a marketing tool. As a result, there has been a sharp increase in the use of digital currencies, particularly for app-based coins and tokens, mobile coupons, and personal data exchanged for digital content. As these trends evolve, digital currencies have the potential to become more popular and compete with traditional currencies. This paper aims to provide some clarity in particular on Bitcoin, its role and potential future use in the financial system and the risks associated with this form of digital currency.. It will begin by providing a short introduction to the Bitcoin network as well as describe the benefits of allowing the Bitcoin network to develop and innovate. It will highlight concerns for consumers, policymakers and financial regulators. Next it will analyze the role that Bitcoin could play in the financial system. The paper will conclude by providing recommendations to address policymakersâ concerns while allowing for further innovation within the Bitcoin network. An initial comprehensive overview of this kind is absent from the existing literature. This paper intends to fill that gap in the literature.
With decentralization and urbanization, the debts of state and local governments and of quasi-public agencies have grown in importance. Rapid urbanization in developing countries requires large-scale infrastructure financing to help absorb influxes of rural populations. Borrowing enables state and local governments to capture the benefits of major capital investments immediately and to finance infrastructure more equitably across multiple generations of service users. \n \nWith debt comes the risk of insolvency. Subnational debt crises have reoccurred in both developed and developing countries. Restructuring debt and ensuring its sustainability confront moral hazard and fiscal incentives in a multilevel government system; individual subnational governments might free-ride common resources, and public officials at all levels might shift the cost of excessive borrowing to future generations. \n \nThis book brings together the reform experiences of emerging economies and developed countries. Written by leading practitioners and experts in public finance in the context of multilevel government systems, the book examines the interaction of markets, regulators, subnational borrowers, creditors, national governments, taxpayers, ex-ante rules, and ex-post insolvency systems in the quest for subnational fiscal discipline. \n \nSuch a quest is intertwined with a countryâs historical, political, and economic context. The formal legal framework interacts with political reality to influence the dynamics of and incentives for reform. Often, the resolution of a subnational debt crisis unfolds in the context of macroeconomic stabilization and structural reforms. \n \nThe book includes reforms that have not been covered by previous literature, such as those of China, Colombia, France, Hungary, Mexico, and South Africa. The book also presents a comprehensive review of how the United States developed its debt market for state and local local governments through a series of reforms that are path \ndependent, including the reforms and lessons learned following state defaults in the \n1840s and the debates that shaped the enactment of Chapter 9 of the Bankruptcy \nCode in 1937. Looking forward, pressures on subnational finance are likely to continueâfrom the fragility of global recovery, the potentially higher cost of capital, refinancing risks, \nand sovereign risks. This book is essential reading for anyone wanting to know the \nchallenges and reform options in debt restructuring, insolvency frameworks, and \npublic debt market development.
We maintain that the crypto-currency bitcoin is a practical application of what is termed âmemoryâ in the monetary economics literature. After reviewing the theoretical literature on money and memory, we offer a brief overview of the bitcoin protocol and argue that, like memory, bitcoin functions as a public record-keeping device. Finally, we provide evidence that â in line with the standard theoretical account of memory â bitcoin use has soared as the expected cost of storing traditional monies increased.
ï»żA bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoinâs daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.
In the past thirty years, a series of plans have been developed by successive Brazilian governments in a continuing effort to maximize the nation's resources for economic and social growth. This planning history has been quantitatively rich but qualitatively poor. The disjunction has stimulated Professor Mello e Souza to address himself to the problem of national planning and to offer some criticisms of Brazilian planning experience. Though political instability has obviously been a factor promoting discontinuity, his criticisms are aimed at the attitudes and strategic concepts which have sought to link planning to national goals and administration. He criticizes the fascination with techniques and plans to the exclusion of proper diagnosis of the socio-political reality, developing instruments to coordinate and carry out objectives, and creating an administrative structure centralized enough to make national decisions and decentralized enough to perform on the basis of those decisions. Thus, fixed, quantified objectives abound while the problem of functioning mechanisms for the coordinated, rational use of resources has been left unattended. Although his interest and criticism are focused on the process and experience of national planning, he recognized variation in the level and results of Brazilian planning. National plans have failed due to faulty conception of the function of planning. Sectorial plans, save in the sector of the petroleum industry under government responsibility, ha e not succeeded in overcoming the problems of formulation and execution thereby repeating old technical errors. Planning for the private sector has a somewhat brighter history due to the use of Grupos Executivos which has enabled the planning process to transcend the formalism and tradition-bound attitudes of the regular bureaucracy. Regional planning offers two relatively successful experiences, Sudene and the strategy of the regionally oriented autarchy. Thus, planning history in Brazil is not entirely black but a certain shade of grey. The major part of the article, however, is devoted to a descriptive analysis of the national planning experience. The plans included in this analysis are: The Works and Equipment Plan (POE); The Health, Food, Transportation and Energy Plan (Salte); The Program of Goals; The Trienal Plan of Economic and Social Development; and the Plan of Governmental Economic Action (Paeg). Using these five plans for his historical experience the author sets out a series of errors of formulation and execution by which he analyzes that experience. With respect to formulation, he speaks of a lack of elaboration of programs and projects, of coordination among diverse goals, and of provision of qualified staff and techniques. He mentions the absence of the definition of resources necessary to the financing of the plan and the inadequate quantification of sectorial and national goals due to the lack of reliable statistical information. Finally, he notes the failure to coordinate the annual budget with the multi-year plans. He sees the problems of execution as beginning in the absence of coordination between the various sectors of the public administration, the failure to develop an operative system of decentralization, the absence of any system of financial and fiscal control over execution, the difficulties imposed by the system of public accounting, and the absence of an adequate program of allocation for the liberation of resources. He ends by pointing to the failure to develop and use an integrated system of political economic tools in a mode compatible with the objective of the plans. The body of the article analyzes national planning experience in Brazil using these lists of errors as rough model of criticism. Several conclusions emerge from this analysis with regard to planning in Brazil and in developing countries, in general. Plans have generally been of little avail in Brazil because of the lack of a continuous, bureaucratized (in the Weberian sense) planning organization set in an instrumentally suitable administrative structure and based on thorough diagnoses of socio-economic conditions and problems. Plans have become the justification for planning. Planning has come to be conceived as a rational method of orienting the process of decisions through the establishment of a precise and quantified relation between means and ends. But this conception has led to a planning history rimmed with frustration, and failure, because of its rigidity in the face of flexible and changing reality. Rather, he suggests a conception of planning which understands it "as a rational process of formulating decisions about the policy, economy, and society whose only demand is that of managing the instrumentarium in a harmonious and integrated form in order to reach explicit, but not quantified ends". He calls this "planning without plans": the establishment of broad-scale tendencies through diagnosis whose implementation is carried out through an adjustable, coherent instrumentarium of political-economic tools. Administration according to a plan of multiple, integrated goals is a sound procedure if the nation's administrative machinery contains the technical development needed to control the multiple variables linked to any situation of socio-economic change. Brazil does not possess this level of refinement and any strategy of planning relevant to its problems must recognize this. The reforms which have been attempted fail to make this recognition as is true of the conception of planning informing the Brazilian experience. Therefore, unworkable plans, ill-diagnosed with little or no supportive instrumentarium or flexibility have been Brazil's legacy. This legacy seems likely to continue until the conception of planning comes to live in the reality of Brazil.
This book is based upon research and reflection supported by BALTA during its initial research program from 2006-2012. It explored many of the themes that became central to BALTAâs work in its Scaling Innovation for Sustainability Project. With our communities confronted by major sustainability challenges, many linked to the impact of climate change, it argues for replacing the paradigm of limitless economic growth with a more decentralized, co-operative, steady-state economy. It examines case studies of success in energy sufficiency, local food systems, low-cost community based financing, affordable housing and land reform. Specific chapters and the book as a whole redefine the development paradigm within a sustainability and steady-state economic framework.