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HomeGlobal Perspective & Critical ResearchCryptocurrency: The Economics of Money and Selected Policy Issues

Cryptocurrency: The Economics of Money and Selected Policy Issues

Author: David W. Perkins 

Affiliation: Congressional Research Service 

Organization/Publisher: Congressional Research Service 

Date/Place: April 9, 2020/Washington D.C, USA

Type of Literature: Report 

Word Count: 15,430 

Link: https://fas.org/sgp/crs/misc/R45427.pdf 

Keywords: Cryptocurrency, Bitcoin 

With the emergence of Bitcoin in 2008, cryptocurrency has become a potential replacement for physical money according to some. However, as this report illustrates, actual transactions in cryptocurrency remain low while investment is high. Since money must act as a medium of exchange, the lack of usage of cryptocurrency in such a way makes it an inconvenient mode of transaction. Furthermore, one must possess certain technological capability and infrastructure in order to engage in this system in the first place. All the existing cryptocurrencies such as Bitcoin, Ether and Litecoin show high volatility in price movements, casting doubts on their functionality. While it does possess some benefits like increased efficiency and an alternative for people who do not trust in traditional payment systems, there are major risks associated with high volatility, negative environmental impact, money laundering, tax evasion, financial sanction evasion and inadequate consumer protection. Adoption of cryptocurrency at a wider level would also weaken the government’s control of inflation and a confusion among buyers and sellers with the availability of multiple currencies. Considering this, countries are debating on producing Central Bank Digital Currencies, but it remains speculative.  

By Sahar Sadiq, CIGA Research Intern 

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