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Should We Resuscitate Currency Competition?

In: Redefining the Monetary Standard in the Digital Age

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  • Livio Stracca

    (European Central Bank)

Abstract

The chapter revisits Friedrich Hayek’s proposal for currency competition as outlined decades ago in his book “The Denationalisation of Money”, a concept which has been brought back to the fore again with the rise of cryptocurrencies. Although Hayek is not the “prophet of cryptocurrencies”, he did suggest allowing different currencies to compete rather than having government-issued fiat money as the default. Hayek’s proposal emerged from his frustration with government control over currency and inflation. However, his ideas faced criticism even from mainstream economists like Milton Friedman and Anna Schwartz, who questioned the practicality and stability of competing currencies. Concerns included legal challenges, lack of trust, and potential regulatory issues. Critics argued that Hayek underestimated the role of government in managing market failure. The chapter also mentions the historical context of free banking systems and the resurgence of interest in Hayek’s ideas with the rise of cryptocurrencies. Ultimately, the feasibility of Hayek’s vision remains debated.

Suggested Citation

  • Livio Stracca, 2025. "Should We Resuscitate Currency Competition?," Springer Books, in: Redefining the Monetary Standard in the Digital Age, chapter 0, pages 115-128, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-89840-2_5
    DOI: 10.1007/978-3-031-89840-2_5
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