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Cryptocurrencies: A Crash Course in Digital Monetary Economics

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  • Jesús Fernández‐Villaverde

Abstract

This article reviews what cryptocurrencies are, and it frames them within the context of historical monetary experiences and contemporary monetary economics. The article argues that, as pure fiduciary private money, cryptocurrencies are a bubble without a fundamental value and they will not provide, in general, optimal amounts of money or deliver price stability. Nevertheless, cryptocurrencies can play a role in improving the current means of payments and in disciplining central banks into providing better government‐run fiduciary monies.

Suggested Citation

  • Jesús Fernández‐Villaverde, 2018. "Cryptocurrencies: A Crash Course in Digital Monetary Economics," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 514-526, December.
    • Handle: RePEc:bla:ausecr:v:51:y:2018:i:4:p:514-526
    DOI: 10.1111/1467-8462.12306
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    Cited by:

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    2. Dong, Bingbing & Jiang, Lei & Liu, Jinyu & Zhu, Yifeng, 2022. "Liquidity in the cryptocurrency market and commonalities across anomalies," International Review of Financial Analysis, Elsevier, vol. 81(C).
    3. Bruno, August & Weber, Paige & Yates, Andrew J., 2023. "Can Bitcoin mining increase renewable electricity capacity?," Resource and Energy Economics, Elsevier, vol. 74(C).
    4. Max Fuchs, 2022. "CBDC as Competitor for Bank Deposits and Cryptocurrencies," MAGKS Papers on Economics 202210, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Alexis Derviz, 2019. "Coexistence of Physical and Crypto Assets in a Stochastic Endogenous Growth Model," Working Papers 2019/7, Czech National Bank.
    6. Hatice Karahan, 2021. "Assessing the future prospects for cryptocurrencies," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 3(1), pages 32-37, January.
    7. Levulytė, Laura & Šapkauskienė, Alfreda, 2021. "Cryptocurrency in context of fiat money functions," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 44-54.

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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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