Comments on “How do Private Digital Currencies Affect Government Policy?”

Prof. Gur Huberman, of Columbia Business School, commented on Prof. Yermack’s presentation. He found Prof. Yermack’s typology useful. He pointed out that the authors’ analysis is more likely to apply in corrupt regimes. A private decentralized digital currency is owned by no one, rules are fixed by a protocol and participants are price-takers. Thus, there is no issue of rent extraction. However, bitcoin is only one model of private digital currency. Others may entail a trusted party, then, there will be rent extraction. Prof. Huberman raised further important questions: Who supplies digital currency? What is the welfare implication if a private digital currency is used to evade capital control or to conduct the transfer of illegally obtained wealth? Is a digital currency, which has no underlying value, an asset? Is some flexibility in levying seigniorage desirable?…