Bitcoin, a form of virtual currency, has received a lot of attention in recent years – and for good reason. Virtual currencies can facilitate all sorts of transactions, but because of the anonymity conferred on users, this digital money can fund terrorism, assist in crimes and abet money laundering. A staff team at the International Monetary Fund looks into this rapidly changing phenomenon and makes suggestions for how best to govern it without suppressing innovation. getAbstract recommends this comprehensive and informative report to business managers, economists, policy makers, and anyone with an interest in e-commerce and digital trade.
In this summary, you will learn
- What risks virtual currencies create,
- How they fall short in fulfilling some of money’s traditional functions and
- What challenges virtual currencies pose for regulators.
About the Authors
Dong He et al. are staff members of the International Monetary Fund.
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Comment on this summary
3 years agoGood Read, IMHO Some of the arguments for how VC's differ from traditional fall a little flat.
VCs can’t serve as a “store of value” due to their price instability - Money markets are also not completely stable. I posit the more frequent ups and downs are the result of it being a computer based currency and that the traditional currency markets will become just as volatile once they are controlled more by algorithms.
VC isn’t an “independent unit of account” since transactors gauge a VC’s value by its exchange rate with a legal currency. - By this logic many countries including Saudi Arabia don't have true currencies because they are pegged to the US dollar.
their use as a “medium of exchange” is also restricted, because only a limited audience pays for and accepts transactions with VCs. - Currently accurate. Similar to how Credit Cards weren't accepted everywhere initially (or at fast food chains until fairly recently). Merchants will find a way to get money if enough customers want to pay with VC.