The New Money: The Utility of Cryptocurrencies and the Need for a New Monetary Policy

Abstract

Since its inception in 2008, cryptocurrencies are gaining adoption globally. Even though its utility may vary, the primary purpose of cryptocurrencies is to provide some form of payment (or medium of exchange) in the digital world. As more use cases arise from the industry, cryptocurrencies and blockchain are no longer a niche topic. Educational institutions are introducing it into their curriculum, and governments are talking about it in parliament. In particular, governments are keen to determine if the underlying technologies can form the fundamentals to issue a Central Bank issued Digital Currency (CBDC). Will these forms of currency become the “New Money”? This paper sets out to explore the utility of cryptocurrencies and CBDC, their implications on the economy and the government’s ability to use monetary policy. We examine and compare the approaches to CBDCs suggested by various governments.

Keywords: Central Bank Digital Currency, Cryptocurrency, Payment System, Distributed Ledger Technology, Monetary Policy, DCEP, Libra