Money in the Time of Crypto

Abstract

This paper investigates the evolution of cryptocurrencies. By nature and essence, Bitcoin challenged and implicitly threatened central banks money and their role in the monetary system. Meanwhile, central banks have been studying and launching pilot projects on their own digital currency, Central Bank Digital Currency. If until recently almost all economists considered Bitcoin as merely a speculative asset, El Salvador decision in 2021 of establishing it as legal tender - through the Bitcoin Law - questions the status quo perception of Bitcoin. In view of El Salvador obligation by law of their acceptance, of the possibility to pay taxes to the government through them and of settling debts through their use, the Bitcoin Law challenges the boundaries of money. In light of El Salvador experience, we consider different points of view on the nature of money allowing us to reject or to include Bitcoin and cryptocurrencies inside money spectrum.

Keywords: Cryptocurrencies, CBDC, Nature of Money, Theories of Money, El Salvador

JEL Classification: B26, E40, E42, E51