The Potential Impact of Decentralized Virtual Currency on Monetary Policy

Abstract

One of the most unexpected global monetary developments in the past decade has been the emergence of decentralized virtual currencies. Bitcoin, the largest and best known of the decentralized virtual currencies, has well-documented market properties—including its use as an international vehicle currency. Decentralized virtual currencies are of particular interest to central bankers because eventually they could change administration of monetary policy globally by allowing users to circumvent capital controls and managed exchange rates.

Keywords: Bitcoin, Cryptocurrency, Monetary Policy, Capital Controls, Exchange Rates