De-Mystifying Digital Currencies

28 Pages Posted: 16 Feb 2024

Date Written: January 26, 2024


The potential of digital currencies—monetary currencies that are evidenced electronically and not in physically tangible form— to improve the speed and efficiency of payments and to broaden financial inclusion makes such currencies an important part of our future. Large “wholesale” payments among businesses and financial institutions already occur digitally, and Bitcoin has been with us for more than a decade. Recent events, including turmoil in digital asset markets and growing doubt about the status of the U.S. Dollar as the global reserve currency, have increased the importance of studying digital currencies. Three approaches to digital currency have emerged with varying levels of governmental and private sector support: generic cryptocurrencies, stablecoins, and central bank digital currencies (CBDC). Generic cryptocurrencies refer to digital currencies that are electronically evidenced using secure cryptography. Stablecoins are a subset of cryptocurrencies that are backed by assets having intrinsic value. CBDC may be either a type of central bank sponsored cryptocurrency or a central bank sponsored digital currency issued under account-based models (utilizing electronic funds transfer systems such as FedWire or FedNow). This Article discusses each approach and briefly comments on the suitability of each to fulfill the three primary functions of currency: as a medium of exchange, as a store of value, and as a unit of account. The Article also considers regulatory concerns with the adoption of retail digital currencies and evaluates potential solutions.

Suggested Citation

Schwarcz, Steven L., De-Mystifying Digital Currencies (January 26, 2024). Law and Contemporary Problems, Forthcoming, Duke Law School Public Law & Legal Theory Series No. 2024-14, Available at SSRN:

Steven L. Schwarcz (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)

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