This literature review covers hyperinflation in Venezuela, from the 1980s to the present. Particular emphasis is placed on the role of cryptocurrency in the country and how the Venezuelan government has been using crypto, specifically the Petro, as a means to avoid further blunders with hyperinflation. From Hugo Chávez and “Socialism of the 21st Century” to the current regime of Nicolás Maduro, Chávez’ successor, the printing of money in Venezuela has sky-rocketed to the point of the government needing cryptocurrency, such as Bitcoin, as a means of circumventing inflation to fund the government’s ambitious social projects. A key element in its success, however, will be whether the Venezuelan people will opt to use the government-backed Petro, or whether they will opt to use a different, decentralized alternative digital currency to avoid the perils of hyperinflation. The paper will examine this issue from several diverse points of view: specifically, the Austrian School (Echarte Fernández, Hernández, & Zambrano, 2018), the neo-Keynesian school (Pagliacci & Barráez, 2010), and public policy and institutional perspective (Corrales, 1999). The use of cryptocurrencies by governments, in particular socialist governments, is a new occurrence and merits much attention for the future of public and monetary policy in those countries.
Petr Kuznetsov, Yvonne-Anne Pignolet, Pavel Ponomarev, Andrei Tonkikh
Most modern asset transfer systems use consensus to maintain a totally ordered chain of transactions. It was recently shown that consensus is not always necessary for implementing asset transfer. More efficient, asynchronous solutions can be built using reliable broadcast instead of consensus. This approach has been originally used in the closed (permissioned) setting. In this paper, we extend it to the open (permissionless) environment. We present {Pastro}, a permissionless and asynchronous asset-transfer implementation, in which quorum systems, traditionally used in reliable broadcast, are replaced with a weighted Proof-of-Stake mechanism. {Pastro} tolerates a dynamic adversary that is able to adaptively corrupt participants based on the assets owned by them.
This paper uses a search-theoretic model to study conditions under which cryptocurrency is valued and under which it coexists with fiat money. In my model, a cryptocurrency economy is one in which private agents’ decisions determine the stock of money and in which the marginal cost of producing money is increasing in the existing nominal stock. I show that the inflation rate of cryptocurrency must be zero in a stationary monetary equilibrium. This result is in sharp contrast to models with fiat money in which the stock of money is exogenously given. In fiat money economies, the inflation rate is determined by the rate of growth of the money stock. My result is also in sharp contrast with other types of private money economies, in which the inflation rate must necessarily be different from zero. In such private money economies, the cost of producing additional money does not depend on the existing nominal stock. Moreover, I show that cryptocurrency and fiat money can circulate at the same time and that the rates of return on these two assets may not be the same. Competition with cryptocurrency restricts the government’s ability to over-issue fiat money and thereby might improve on pure fiat money equilibria without government commitment.
Bank runs are a natural phenomenon for financial institutions that issue fixed value liabilities (e.g. money) that are backed by assets with uncertain value. I analyze Iron Finance, a decentralized finance (DeFi) protocol that issues stablecoin (a token with fixed nominal exchange rate: IRON) liabilities in exchange for a basket of other tokens (including a token issued by the protocol itself: TITAN). A combination of mathematical algorithms and incentive to arbitrage is used to maintain the exchange rate peg, but a shock to the protocol sent it into a downward spiral – much like a bank run. The incentives built into the protocol to defend the peg exacerbated its unravelling, raising the challenge of how DeFi protocols can address this vulnerability while remaining decentralized.
Daniel Santos Kosinski, Valter Duarte Ferreira Filho
O bitcoin foi lançado em 2009 com a pretensão de ser moeda privada, não institucional e livre dos arbítrios governamentais. Não teve êxito como tal, mas mostrou-se um meio para transferir direitos fora da vigilância e do controle das autoridades nacionais e internacionais. Por isso, o governo da China, extremamente cioso da sua soberania monetária, o considerou uma ameaça à segurança financeira, reprimindo o seu uso. Apesar disso, identificou nas tecnologias do bitcoin uma oportunidade para criar uma moeda digital governamental. O resultado foi a instituição do “renmimbi digital”, com o qual pretende maior rapidez e eficácia na execução das políticas internas, controlar essa nova modalidade de transações comerciais e, se possível, erguer as bases de uma nova ordem financeira centrada na China.
In recent decades, the birth of crypto-currency has challenged the monopoly of paper money controlled by national central banks and their respective states. From a decentralized conception of the economy, digital currencies such as Bitcoin have tried to replace traditional money as a new and more democratic form of economic relationship. However, it is necessary to confront these new forms of economic exchange with Karl Marx's analyses in Das Kapital to see whether they really represent an effective alternative to capitalism or whether they fall into new forms of capitalist relations.
Although technological advances have always been readily adopted into finance, the current wave of technology-enabled financial innovation – driven by advances in data transmission and processing – is notable for its influence on the structure of the provision of financial services. The chapter starts by reviewing the drivers and forms of technology-enabled innovations in financial services. The next section reviews the impact of innovations on the structure of the financial system including competition dynamics between traditional and new financial service providers, including large technology companies. As the business model of large technology companies is based on their capacity to collect and analyze data on their customers (which is fundamental to the provision of financial services) and involves positive network externalities, large technology companies can gain significant market share in financial services. On the other hand, decentralization and disintermediation of financial services may reduce risk exposure of financial intermediaries but systemic risks borne by the real sector may stay unchanged. The potential changes in the financial system structure are then assessed from the point of view of systemic risk, using the framework of intermediate objectives of macroprudential policy developed by the ESRB as a typology of systemic risk. Finally, implications for public policy are presented. It is argued that in order to counter systemic risk, an integrated analysis and policy response is warranted, covering the fields of financial stability, competition policy, data and consumer protection. JEL classification: G21, G28, O33, E51.
Purpose The most prominent and persistent problems of our global monetary system are instability and imbalances. We propose an international monetary model to solve these problems while at the same time move the model closer to Maqāṣid Sharīʿah (objectives of Sharīʿah). We name this an organic global monetary model or abbreviated as OGM. OGM is an international monetary model directly built on the national monetary system of each member country so that the two can co-exist. Design/methodology/approach Model design, theory and literature. Findings The model can eliminate interest rates at the central bank level, create non-tradable international money, and make a more stable international monetary system. Originality/value Original.
Development needs have primarily been financed through private sector financing, conventional public sector funding and philanthropic commitment. These traditional sources are not sufficient in scale and speed to meet the pressing finance needs. The world community is too busy repairing, stabilizing and refunding the given to maintain the stability of the existing system, relying on a mechanical model. Out-of-the-box approaches which blend in with the given tools, providing new financial engineering are required. The introduction of a parallel electronic currency specifically designed to finance global commons and the human-centered economy would provide a systemic non-linear and complex approach to create the necessary resources to achieve the UN SDGs and addressing asymmetric shocks (COVID-19, among others), while stabilizing the existing monetary system. The development of cryptocurrencies based on blockchain distributed ledger technologies has prompted leading central banks and other agencies around the world to study the potential application of this approach to directly inject purchasing power without dependence on the banking system. Proposals are now being studied by an international expert group on how this approach can be utilized to finance the huge multi-trillion-dollar annual investment requirements for achieving the Sustainable Development Goals, with special emphasis on investments in human resources and environmental protection. A first outline is given in this preview. A full report (The Tao of Finance) of the expert group will be published in late 2020.
Bitcoin, and more generally, cryptocurrencies, are often described as a new type of money. In this post, we argue that this is a misconception. Bitcoin may be money, but it is not a new type of money. To see what is truly new about Bitcoin, it is useful to make a distinction between “money, ” the asset that is being exchanged, and the “exchange mechanism, ” that is, the method or process through which the asset is transferred. Doing so reveals that monies with properties similar to Bitcoin have existed for centuries. However, the ability to make electronic exchanges without a trusted party—a defining characteristic of Bitcoin—is radically new. Bitcoin is not a new class of money, it is a new type of exchange mechanism, and this type of exchange mechanism can support a variety of forms of money as well as other types of assets.
Purpose The paper explores the precarious balance between modernizing monetary systems by means of digital currencies (either issued by the central bank itself or independently) and safeguarding financial stability as also ensured by tangible payment (and saving) instruments like paper money. Design/methodology/approach Which aspects of modern payment systems could contribute to improve the way of functioning of today's globalized economy? And, which might even threaten the above-mentioned instable equilibrium? This survey paper aims, precisely, at giving some preliminary answers to a complex – therefore, ongoing – debate at scientific as well as banking and political levels. Findings The coexistence of State's money (i.e. “legal tender”) and cryptocurrencies can have a disciplining effect on central banks. Nevertheless, there are still high risks connected to the introduction of central bank digital currency, which should be by far not considered to be a perfect substitute of current cash. At the same time, cryptocurrencies issued by central banks might be exposed to the drawbacks of cryptocurrencies without benefiting from correspondingly strong advantages. A well-governed two-tier system to be achieved through innovation in payment infrastructures might be, in turn, more preferable. Regulated competition by new players combined with “traditional” deposits and central bank elements remains essential, although central banks should embrace the technologies underlying cryptocurrencies, because risk payment service providers could move to other currency areas considered to be more appealing for buyers and sellers. Research limitations/implications We do not see specific limitations besides the fact that the following is for sure a broad field of scientific research to be covered, which is at the same time at the origin of ongoing developments and findings. Originality and implications of the paper are, instead, not only represented by its conclusions (which highlight the role of traditional payment instruments and stress why the concept of “money” still has to have specific features) but also by its approach of recent literature's review combined with equally strong logical-analytical insights. Practical implications In the light of these considerations, even the role of traditional payment systems like paper money is by far not outdated or cannot be – at this point, at least – replaced by central bank digital currencies (whose features based on dematerialization despite being issued and guaranteed by a public authority are very different). Social implications No matter which form it might assume is what differentiates economic from barter transactions. This conclusion is by far not tautological or self-evident since the notion of money has historically been a great object of scientific discussion. In the light of increasingly modern payment instruments, there is no question that money and the effectiveness of related monetary policies have to be also explored from a social perspective according to different monetary scenarios, ranging from central bank digital currencies to private currencies and cash restrictions/abolition. Originality/value The originality/value of the following article is represented by the fact that it (1) refers to some of the most relevant and recent contributions to this research field, (2) moves from payment systems in general to their newest trends like cryptocurrencies, cash restrictions (or, even, abolition proposals) and monetary policy while (3) combining all elements to reach a common picture. The paper aims at being a comprehensive contribution dealing with "money" in its broadest but also newest sense.
Abstract Crypto currencies have sparked great interest lately not only among regular people, billionaires and Wall Street, but it also caught the attention of national and global financial regulators across the world. In this article, we try to answer the following questions: what is bitcoin? It is money, a mean of payment, a huge bubble or just a way to evade taxes, launder money and fund illegal trade? We will answer these questions by testing whether bitcoin is a bubble with the help of right-tailed ADF tests and analyzing if the price of bitcoin has experienced shocks. We identify bitcoin price shock when the price of bitcoin is above its Hodrick-Prescott trend plus one standard deviation. Also, we will analyze if bitcoin fulfils the roles of money and if itself or a stablecoin like Libra can attain an important place within the international monetary system. We will also research the potential risks associated with the adoption of Libra, especially in poorer countries. Despite Bitcoin and Libra’s weaknesses, an advantage is that they insist on the necessity of faster and cheaper cross-border funds transfers 24/7, 365 days a year.
The emergence of cryptocurrencies has been one of the most notable monetary phenomenon of the last decade. Many academics and analysts have found a clear precedent to this event in Friedrich Hayek's latest monetary work, Denationalization of money. The aim of this article is to analyze what we can learn about cryptocurrencies by re-reading this book. As will be proven, Hayek would surely have rejected the idea that Bitcoin and cryptocurrencies with similar characteristics could be accepted as money in the market. Furthermore, this paper will prove that a very close connection between Stablecoins and private money exists, following the Austrian economist’s predictions in a context of monetary competition.
Com o surgimento das Criptomoedas os debates sobre sua regulamentação jurídica e sua confiabilidade vêm se destacando no âmbito jurídico. Este presente trabalho tem o objetivo de contribuir, sobre o que são Criptomoedas, como funcionam e a possibilidade ou impossibilidade de sua regulamentação. Com base em diversas obras de autores em várias áreas de conhecimento, explora-se a Criptomoeda em um âmbito mais geral, além do principal foco, que e a viabilidade de incidência desse ativo no imposto de renda. Ademais, a questão da natureza tributária da Criptomoeda. O desenvolvimento deste trabalho inicia conceituando com o contexto histórico da moeda, conceituando Criptomoedas assim como a mais conhecida delas, chamada Bitcoin e seus desdobramentos, com uma analise jurídica do tema, estudando a necessidade/possibilidade de sua regulamentação.
This article introduces the special issue featuring “The evolution of diverse e-money: digital-community currencies and cryptocurrencies,” and argue on diversity and evolution of modern money, including community currencies and cryptocurrencies. How such new “currencies” survive through users’ choice in money and what the criteria of such decision are highly critical issues. We contrast the meanings of Gresham’s law “Bad money drives out good,” and Hayek’s principle of choice in money “Good money drives out bad” and show that there are necessary conditions for either Gresham’s law or the principle of choice in money to hold. For the principle of “choice in currency” to function well, both (1) different denominations for the distinction of money in quality, and (2) the non-fixed exchange rates are necessary. Since cryptocurrencies met these conditions, the principle of choice in money began to work. Cryptocurrencies took the test of users’ choice in money in the search for good money but failed to pass the criteria of stability of currency value. Then, digital-community currencies that involve local and community contexts are the next candidates for good money. We observe that two DCCs in Japan, Sarubobo Coin and Kisarazu Coin are currently challenging toward the realization of good money.
This article is about the role that states play in the research and development of cryptocurrencies and their underlying technology. Some states, for instance China, are about to launch their own state-backed cryptocurrency perhaps due to the potential of this new type of digital money to become world money. To support this argument, Marxist monetary theory is deployed to show that cryptocurrencies could be conceived as potential digital commodity money, a new and incorporeal type of commodity money with intrinsic value but without use value. Lacking a natural form, it could potentially have only a “formal” use value: direct exchangeability with all other commodities. If states manage to actualise this potential by issuing their own cryptocurrencies and making them legal tender money, cryptocurrencies could function as international means of payments and means of hoarding perhaps more efficiently than credit money. In the case of China, this means that this new digital money would have a chance of competing with the US dollar as international reserve currency.
The purpouse of this paper is analyse if the called bitcoin can be defined as currency.Therefore, \nfirst is analysed the bitcoin tecnology, specially its structuring from the encryption development \nby blockchain. The main characteristics of this technological structure are studied, wich allowed \nits fast diffusion, with the sufficient confidence and security in the transactions, at low cost, \nwithout the intervention of third parties, be it the State or the banking system.Later, the study \nturns to the concept of money, from the economic point of view, under the focus of the main \ntheories developed. At this point, a special analysis is made from the studies of the Austrian \nschool of economics, especially by Luwig von Mises and his regression theorem, developed to \nexplain the origin of the currency. Once these parameters have been established, bitcoin attributes are analyzed, having this paper concluded that its volatility and lack of liquidity prevent, \nfor the moment, its characterization as currency. It should be noted that this paper serves as a \nstarting point for future work on the legal effects of bitcoin, in particular in criminal law. However, it is necessary to define the nature of bitcoin.
Sameti Morteza, Mohammad Djawadi, Emadzadeh Mostafa
Theories of money and credit can be divided into two general categories: commodity theory of money and credit theory of money. Both categories
theoretically question the acceptance of cryptocurrencies as money. The present study aimed to provide a new interpretation of the Theory of
Money and Credit in relation to both theories mentioned above. First, the functions of public trust was taken as a commodity, which is consistent
with Karl Mengers views and the subjective theory of value. Based on this approach, the definitions of the credit theory of money will be acceptable
with a new interpretation. This new interpretation also involves an extension of Hayek's definition of money, which is consistent with Mises'
definition of money. Then, the concept of intertemporal preferences, with an emphasis on the barter root of money based on Mises regression
theorem, was used to show that cryptocurrencies can be accepted as money as far as they serve as private currency and suit the computability of
dynamics of Underlying Economic Realities with intertemporal preferences. Therefore, the main criterion for defining money is how it affects
intertemporal preferences
O objetivo do presente trabalho e analisar a tecnologia existente na moeda bitcoin, sua aceitacao no mercado brasileiro, a regularizacao, a sustentabilidade e os rumores existentes do impacto desta tecnologia na politica monetaria. Desde o inicio de 2009, e comprovado o avanco de usuarios da tecnologia criptografada. O fato das moedas eletronicas nao estarem sob a fiscalizacao de nenhum pais pode ser um fator perturbador para alguns governos, como a China, Russia e EUA, que tem demonstrado o interesse em ter sua propria moeda eletronica. No Brasil, existe um projeto de lei para a regularizacao da moeda eletronica, que ficara sob a fiscalizacao do Banco Central (BACEN). Entretanto, ainda nao ha definicao de uma politica monetaria que envolva a utilizacao desta moeda. Apesar das especulacoes acerca da permanencia da moeda no mercado mundial, esta demonstra grande crescimento e rentabilidade, alcancando valores de US$ 481,85 (Quatrocentos e oitenta e um dolares e oitenta e cinco centavos), em setembro de 2014 ate US$ 4.817,89 (Quatro mil, oitocentos e dezessete dolares e oitenta e nove centavos), em outubro de 2017. Este estudo reuniu informacoes tratadas por meio do metodo qualitativo e quantitativo, com a utilizacao de uma pesquisa bibliografica em livros e artigos de periodicos. Os resultados obtidos revelaram a sustentabilidade da moeda, demonstrando que ela pode suportar projetos de longo prazo, que para o futuro, os governos definam uma politica monetaria que possa incluir a utilizacao dos bitcoins.
Elena Sinelnikova-Muryleva, Kirill Shilov, Andrey Zubarev
The aim of the article is to systematize the views on the concept of cryptocurrency from the literature and among international and national organizations and regulators, to analyze its economic essence and the place in the modern monetary and financial system. The definition and the functions of cryptocurrency are discussed in the framework of descriptive and theoretical analysis. The paper systematized the existing approaches to the concept analysis of cryptocurrency; the place of cryptocurrency in modern economic theory is shown.The article concludes that cryptocurrencies are often determined through the set of basic characteristics. Cryptocurrencies are not money, though they can perform the main function of money — to be a means of payment; they can be a means of making settlements, assets, platforms for concluding smart contracts, a means for crowdfunding. They are not private money in Hayek’s interpretation. Cryptocurrencies can be described in the framework of the models of new monetarism (payment economics).