Cryptocurrencies and the Future of Money

TL;DR

This paper reviews various cryptocurrencies, analyzing their economic properties, and proposes a macroeconomic model that incorporates different types of digital currencies, highlighting their potential roles in future monetary systems.

Contribution

It provides a comprehensive classification of cryptocurrencies based on economic properties and introduces a macroeconomic framework integrating these diverse digital currencies.

Findings

Pure-asset coins resemble commodities like gold.

Central bank digital currencies are liabilities of central banks.

Stable coins vary in economic complexity and use cases.

Abstract

We review different classes of cryptocurrencies with emphasis on their economic properties. Pure-asset coins such as Bitcoin, Ethereum and Ripple are characterized by not being a liability of any economic agent and most resemble commodities such as gold. Central bank digital currencies, at the other end of the economic spectrum, are liabilities of a Central Bank and most resemble cash. In between, there exist a range of so-called stable coins, with varying degrees of economic complexity. We use balance sheet operations to highlight the properties of each class of cryptocurrency and their potential uses. In addition, we propose the basic structure for a macroeconomic model incorporating all the different types of cryptocurrencies under consideration.