The Economics of Cryptocurrencies | J.P. Morgan



oh well I'm Mike for Olli chief US economist at JPMorgan as an economist looking at cryptocurrencies there are two economic issues that we find of interest first is whether cryptocurrencies actually function as money and the second is how do central banks respond or react to the growth of cryptocurrency on the first issue cryptocurrencies as currently structured do not meet the definition of money functionally because their lack of stability of value makes them unusable as either a unit of account or a medium of exchange for this reason existing cryptocurrencies do not meet the functional definition of money potentially some day in the future if they do attain that stability of value it may still be hard to displace existing currency such as the dollar or the euro because those tend to function as natural monopolies and thus are hard to dislodge the second issue regarding crypto currencies is whether central banks may at some point want to issue their own crypto currencies for example some central banks have talked about doing this which were trade one for one with the existing currency now this is an interesting conversation but there are some tricky design issues including whether these potential central bank cryptocurrencies would retain the anonymity of existing crypto currencies there may be concerns because then the central bank would be facilitating potentially the black market activity that could be associated with such a cryptocurrency that being said the distributed ledger technology will still be followed by the central banks because central banks generally are important stakeholders in the payment systems of their countries and some of the nodes of those payment systems may usefully employ distributed ledger technology in the future and for that reason I think central banks will want to remain engaged in this conversation

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