Argument by False Analogy: The Mistaken Classification of Bitcoin as Token Money
28 Pages Posted: 17 Dec 2018 Last revised: 29 Feb 2020
Date Written: November 25, 2018
This paper challenges widespread preconceptions about cryptocurrencies and other crypto assets. They are not monetary tokens or objects but accounting entries (like deposit money and custodian bank security accounts). Their innovation is not ‘decentralisation’ but use of single (rather than multiple) ledgers; automated secure transfer; and potential anonymity. This has practical implications: (i) crypto assets require no new framework of law and regulation with AML rules applying directly to crypto institutions (ii) ‘CBDC’ or central bank account money already exists, the policy issues are (a) who may directly or indirectly hold central bank accounts? (b) what mechanisms should identify holders?
Keywords: bank payments, bank reserves, blockchain, central banking, central bank digital currency, closed money, cryptocurrency, cryptography, distributed ledgers, electronic currency, fiduciary money, financial regulation, financial technology, initial coin offering, monetary nominalism, monetary technology
JEL Classification: B53, E42, G21
Suggested Citation: Suggested Citation