Money in the Twenty-First Century: From Rusty Coins to Digital Currencies

Abstract

After the Global Financial Crisis, central banks became identified as banks’ closest allies, rescuing them from failure when things go wrong. Banks, in turn, emerged as complex and unstable institutions that privatize profits and socialize losses, to the despair of taxpayers. And regulation and regulators were seen as incapable of curbing financial excess. The coronavirus pandemic only exacerbated the generally negative sentiment, as governments lacked a fast and simple way to send relief money directly to their citizens. In the meantime, sovereign currencies have faced increased private competition, from Bitcoin to big tech global projects. At this point, some structural reform of the monetary system seems not only desirable but inevitable. It is about time to look again at the role of money in the modern economy and better understand its features and flaws. This Article thus offers a guide to the recent evolution of money and what its future might hold.

Keywords: cryptocurrency, bitcoin, stablecoins, e-money, cbdc, central banking, TBTF

JEL Classification: E42, E51, E58, G21, K23