How do Private Digital Currencies Affect Government Policy?

Throughout history, everything from beaver pelts to cigarettes has been used as money, and as the world has become more digital, so too has its currencies. For the developed world, this has meant fractional reserve banking systems based on fiat currency managed by government-run central banks and intermediated through private banking systems. For emerging markets, however, this has meant a number of different approaches, from sound monetary policy and dollarization to grey markets and monetary instability. Emerging markets have always faced the specter of currency crises, and in recent years, countries like Argentina and Turkey have also experienced such crises. What makes these crises different is that they are the first to have occurred in a world with digital currencies such as bitcoin…