IDEAS home Printed from https://ideas.repec.org/p/oec/dafaad/37-en.html
   My bibliography  Save this paper

The Bitcoin Question: Currency versus Trust-less Transfer Technology

Author

Listed:
  • Adrian Blundell-Wignall

    (OECD)

Abstract

The financial crisis has led to a widespread loss of trust in financial intermediaries of all kinds, perhaps helping to open the way towards the general acceptance of alternative technologies. This paper briefly summarises the crypto-currency phenomenon, separating the ‘currency’ issues from the potential technology benefits. With respect to crypto currencies, the paper argues that these can’t undermine the ability of central banks to conduct monetary policy. They do, however, raise consumer protection and bank secrecy issues. The valuation of Bitcoins and price volatility issues are discussed, as well as electronic theft, contract failures, etc., all of which could result in large losses to users and hence ultimate costs to the taxpayer (e.g. the failure to provide adequate private pensions resulting in increased reliance on public pensions). The anonymity features of the crypto-currencies also facilitate tax evasion and money laundering, both of which are major public policy concerns. The technology associated with crypto-currencies, on the other hand, could ultimately shift the entire basis of trust involved in any financial transaction. It is an innovation that creates the ability to carry out transactions without the need for a trusted third party; i.e. a move towards trust-less transactions. This mechanism could work to eliminate the role of many intermediaries, thereby reducing transactions costs by introducing much needed competition to incumbent firms. The generic issues that policy makers need to examine are summarised.

Suggested Citation

  • Adrian Blundell-Wignall, 2014. "The Bitcoin Question: Currency versus Trust-less Transfer Technology," OECD Working Papers on Finance, Insurance and Private Pensions 37, OECD Publishing.
  • Handle: RePEc:oec:dafaad:37-en
    DOI: 10.1787/5jz2pwjd9t20-en
    as

    Download full text from publisher

    File URL: https://doi.org/10.1787/5jz2pwjd9t20-en
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Radu, BORES & Ana Maria, HLACIUC, 2016. "Digital Currency In The Current Cyber Security Environment," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 1(3), pages 70-79.
    2. Beat Weber, 2014. "Bitcoin – The Promise and Limits of Private Innovation in Monetary and Payment Systems," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 53-66.

    More about this item

    Keywords

    Bitcoin; Gold standard; intermediaries; legal tender; monetary policy; payment technology; plenary powers; trust-less transaction;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F39 - International Economics - - International Finance - - - Other
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G2 - Financial Economics - - Financial Institutions and Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:dafaad:37-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/caoecfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.