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The Holy Grail of Crypto Currencies: Ready to Replace Fiat Money?

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  • Richard Senner
  • Didier Sornette

Abstract

This article suggests that current forms of crypto currencies will fail to complement or replace fiat money. We show that fixed-supply coins like bitcoin suffer from an inherently speculative and deflationary design and are not backed by a “We Owe You”. Stablecoins, i.e. coins that rely on flexible supply designs, are also not backed by a “We Owe You” and cannot achieve price stability because they build on outdated monetarist theories. Moreover, the algorithmically planned allocation of new coins, which is characteristic of stablecoins, is not market-based. As such, it is inferior to contemporary ways of money creation. Regarding price stability, we suggest that (crypto) monetary policy needs to overcome the illusionary dichotomy between the real and the financial circuit by accounting for systematic coordinated wage bargaining mechanisms to reflect that firms set prices according to cost-based pricing rules.

Suggested Citation

  • Richard Senner & Didier Sornette, 2019. "The Holy Grail of Crypto Currencies: Ready to Replace Fiat Money?," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(4), pages 966-1000, October.
    • Handle: RePEc:mes:jeciss:v:53:y:2019:i:4:p:966-1000
    DOI: 10.1080/00213624.2019.1664235
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    2. Fabian Mayer & Peter Bofinger, 2024. "Cryptocurrency competition: empirical testing of Hayek’s vision of private monies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-46, December.
    3. Mayer, Fabian & Bofinger, Peter, 2023. "Cryptocurrency competition: An empirical test of Hayek's vision of private monies," W.E.P. - Würzburg Economic Papers 103, University of Würzburg, Department of Economics.
    4. Fahr, Stephan & Senner, Richard & Vismara, Andrea, 2024. "The globalization of climate change: amplification of climate-related physical risks through input-output linkages," Working Paper Series 2942, European Central Bank.
    5. Fernando TEIXEIRA & Susana Soares Pinheiro Vieira PESCADA & Christos Ap. LADIAS & Murat HULAJ & Filipos RUXHO & Valter MACHADO, 2025. "Stablecoin Dp2p: Innovation And Sustainability In Fiat Currencies," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 95-106, June.
    6. Marco Bellucci & Damiano Cesa Bianchi & Giacomo Manetti, 2021. "A literature review on blockchain in accounting research," Working Papers - Business wp2021_04.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    7. Eichacker, Nina, 2025. "Increasing Stability in the Digital Payment Space: The Potential Institutional Benefits of Central Bank Digital Currencies," SocArXiv 8muc4, Center for Open Science.
    8. Wang, Guizhou & Hausken, Kjell, 2024. "Hard money and fiat money in an inflationary world," Research in International Business and Finance, Elsevier, vol. 67(PB).
    9. Mohamed Khalil Benzekri & Hatice Şehime Özütler, 2021. "On the Predictability of Bitcoin Price Movements: A Short-term Price Prediction with ARIMA," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(2), pages 293-309, July.
    10. Lennart Ante & Ingo Fiedler & Jan Marius Willruth & Fred Steinmetz, 2023. "A Systematic Literature Review of Empirical Research on Stablecoins," FinTech, MDPI, vol. 2(1), pages 1-14, January.
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