New technologies are driving transformational changes in the global financial system. Virtual currencies (VCs) and the underlying distributed ledger systems are among these. VCs offer many potential benefits, but also considerable risks. VCs could raise efficiency and in the long run strengthen financial inclusion. At the same time, VCs could be potential vehicles for money laundering, terrorist financing, tax evasion and fraud. While risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of VCs, risks to financial stability may eventually emerge as the new technologies become more widely used. National authorities have begun to address these challenges and will need to calibrate regulation in a manner that appropriately addresses the risks without stifling innovation. As experience is gained, international standards and best practices could be considered to provide guidance on the most appropriate regulatory responses in different fields, thereby promoting harmonization and cooperation across jurisdictions.
Since the launch of Bitcoin in 2009 several hundred different ‘cryptocurrencies’ have been developed and become accepted for a wide variety of transactions in leading online commercial marketplaces and the ‘sharing economy’, as well as by more traditional retailers, manufacturers, and even by charities and political parties. Bitcoin and its competitors have also garnered attention for their wildly fluctuating values as well as implication in international money laundering, Ponzi schemes and online trade in illicit goods and services across borders. These and other controversies surrounding cryptocurrencies have induced varying governance responses by central banks, government ministries, international organizations, and industry regulators worldwide. Besides formal attempts to ban Bitcoin, there have been multifaceted efforts to incorporate elements of blockchains, the peer-to-peer technology underlying cryptocurrencies, in the wider exchange, recording, and broadcasting of digital transactions. Blockchains are being mobilized to support and extend an array of governance activities. The novelty and breadth of growing blockchain-based activities have fuelled both utopian promises and dystopian fears regarding applications of the emergent technology to Bitcoin and beyond. This volume brings scholars of anthropology, economics, Science and Technology Studies, and sociology together with GPE scholars in assessing the actual implications posed by Bitcoin and blockchains for contemporary global governance. Its interdisciplinary contributions provide academics, policymakers, industry practitioners and the general public with more nuanced understandings of technological change in the changing character of governance within and across the borders of nation-states.
Over the last few years, we have witnessed an upsurge of enthusiasm about cryptocurrencies and, more generally, the so-called blockchain technology. In this new and updated edition, the authors explore what exactly these new technologies entail and promise. They argue that to understand the potential challenges and further developments in the market, one needs to develop an understanding of what needs these innovations fulfill and what business models are consistent with their use. For that, we need to sufficiently understand both the technology and how it affects the economic forces at play. This book goes beyond the headlines that say “blockchain will decentralize everything” and provides in-depth, rigorous analysis of what can be effectively decentralized and how this decentralization will work. The book draws not only on the general knowledge of digital currencies and blockchain technologies, but also on recent academic research on the topic. Featuring a fully updated chapter on cryptocurrencies and new chapters on smart contracts and enterprise blockchains, this book is critical reading for those interested in how technology developments impact business and society.
Digital currencies are a fairly new phenomenon brought about by the spectacular rise of the internet. While Bitcoin is the most famous, there are numerous other digital currencies—from Amazon Coin to Zetacoin. Beyond Bitcoin explores the economic forces underlying the design of their features and their potential. Halaburda and Sarvary argue that digital currencies are best understood by considering the economic incentives driving their creators and users. The authors present a framework that will allow systemic analysis of this dynamic environment and support further discussion of the design of digital currencies' features and the competition in the market.
In January 2009, a mysterious software developer, Satoshi Nakamoto, exchanged a specially designed code with another developer. The code was a digital currency that Nakamoto had proposed several months before in a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” This was the first Bitcoin transaction. Since then, Bitcoin has become the face of a tech revolution in digital cryptocurrencies based on blockchain technology. Its success has sparked a tech revolution that could fundamentally change global economics. Author Brendan January delves into the world of coders, libertarians, criminals, financial regulators, and crypto-detectives to understand what digital cryptocurrencies have to offer, their limitations and potential pitfalls, security issues, and how they may affect government and financial regulations in the future.
This paper marks the launch of a new IMF series, Fintech Notes. Building on years of IMF staff work, it will explore pressing topics in the digital economy and be issued periodically. The series will carry work by IMF staff and will seek to provide insight into the intersection of technology and the global economy. The Rise of Digital Money analyses how technology companies are stepping up competition to large banks and credit card companies. Digital forms of money are increasingly in the wallets of consumers as well as in the minds of policymakers. Cash and bank deposits are battling with so-called e-money, electronically stored monetary value denominated in, and pegged to, a currency like the euro or the dollar. This paper identifies the benefits and risks and highlights regulatory issues that are likely to emerge with a broader adoption of stablecoins. The paper also highlights the risks associated with e-money: potential creation of new monopolies; threats to weaker currencies; concerns about consumer protection and financial stability; and the risk of fostering illegal activities, among others.
What can we learn from Bitcoin and Burning Man about re-inventing money and designing better forms of self-governance? Why are “decentralized autonomous organizations” the next great Internet disruption? From Bitcoin to Burning Man and Beyond: The Quest for Autonomy and Identity in a Digital Society explores a new generation of digital technologies that are re-imagining the very foundations of identity, governance, trust and social organization. The fifteen essays of this book stake out the foundations of a new future – a future of open Web standards and data commons, a society of decentralized autonomous organizations, a world of trustworthy digital currencies and self-organized and expressive communities like Burning Man. Among the contributors are Alex “Sandy” Pentland of the M.I.T. Human Dynamics Laboratory, former FCC Chairman Reed E. Hundt, long-time IBM strategist Irving Wladawksy-Berger, monetary system expert Bernard Lietaer, Silicon Valley entrepreneur Peter Hirshberg, journalist Jonathan Ledgard and H-Farm cofounder Maurizio Rossi. From Bitcoin to Burning Man and Beyond was edited by Dr. John H. Clippinger, cofounder and executive director of ID3, [http://www.idcubed.org] and David Bollier, [http://www.bollier.org] an Editor at ID3 who is also an author, blogger and scholar who studies the commons. The book, published by ID3 in association with Off the Common Books, reflects ID3’s vision of the huge, untapped potential for self-organized, distributed governance on open platforms. One chapter that inspires the book’s title traces the 28-year history of Burning Man, the week-long encampment in the Nevada desert that have hosted remarkable experimentation in new forms of self-governance by large communities. Other chapters explore such cutting-edge concepts as: • evolvable digital contracts that could supplant conventional legal agreements; • smartphone currencies that could help Africans meet their economic needs more effective; • the growth of the commodity-backed Ven currency; and • new types of “solar currencies” that borrow techniques from Bitcoin to enable more efficient, cost-effective solar generation and sharing by homeowners. From Bitcoin to Burning Man and Beyond also introduces the path-breaking software platform that ID3 has developed called “Open Mustard Seed,” or OMS. https://idcubed.org/open-platform/platform The just-released open source program enables the rise of new types of trusted, self-healing digital institutions on open networks, which in turn will make possible new sorts of privacy-friendly social ecosystems. (YouTube video on OMS.) https://www.youtube.com/watch?v=tMCzibfVo3M “OMS is an integrated, open source package of programs that lets people collect and share personal information in secure, and transparent and accountable ways, enabling authentic, trusted social and economic relationships to flourish,” said Dr. Clippinger. Introduction 1. Alex Pentland Social Computing and Big Data 2. John H. Clippinger Why Self-Sovereignty Matters 3. David Bollier & John H. Clippinger The Next Great Internet Disruption 4. Maurizio Rossi The New Mestieri Culture of Artisans 5. Peter Hirshberg Burning Man 6. Irving Wladawsky-Berger The Internet of Money 7. Bernard Lietaer Why Complementary Currencies Are Necessary to Financial Stability 8. Stan Stalnaker Ven and the Nature of Money 9. Reed E. Hundt, Jeffrey Schub & Joseph R. Schottenfeld Green Coins 10. Jonathan Ledgard Africa, Digital Identity and the Beginning of the End for Coins 11. Mihaela Ulieru The Logic of Holonic Systems 12. Jeremy Pitt & Ada Diaconescu The Algorithmic Governance of Common-Pool Resources 13. Thomas Hardjono, Patrick Deegan & John H. Clippinger The ID3 Open Mustard Seed Platform 14. Patrick Deegan The Relational Matrix: 15. Harry Halpin The Necessity of Standards for the Open Society
Technology is changing money: it has been transformed from physical objects to intangible information. With the arrival of smart cards, mobile phones and Bitcoin it has become easier than ever to create new forms of money. Crucially, money is also inextricably connected with our identities. Your card or phone is a security device that can identify you – and link information about you to your money. To see where these developments might be taking us, David Birch looks back over the history of money, spanning thousands of years. He sees in the past, both recent and ancient, evidence for several possible futures. Looking further back to a world before cash and central banks, there were multiple ‘currencies’ operating at the level of communities, and the use of barter for transactions. Perhaps technology will take us back to the future, a future that began back in 1971, when money became a claim backed by reputation rather than by physical commodities of any kind. Since then, money has been bits. The author shows that these phenomena are not only possible in the future, but already upon us. We may well want to make transactions in Tesco points, Air Miles, Manchester United pounds, Microsoft dollars, Islamic e-gold or Cornish e-tin. The use of cash is already in decline, and is certain to vanish from polite society. The newest technologies will take money back to its origins: a substitute for memory, a record of mutual debt obligations within multiple overlapping communities. This time though, money will be smart. It will be money that reflects the values of the communities that produced it. Future money will know where it has been, who has been using it and what they have been using it for.
An economic analysis of what distributed ledgers can do, examining key components and discussing applications in both developed and emerging market economies. Distributed ledger technology (DLT) has the potential to transform economic organization and financial structure. In this book, Robert Townsend steps back from the hype and controversy surrounding DLT (and the related, but not synonymous, innovations of blockchain and Bitcoin) to offer an economic analysis of what distributed ledgers can do. Townsend examines the key components of distributed ledgers, discussing, evaluating, and illustrating each in the context of historical and contemporary economics, and reviewing featured applications in both developed economies and emerging-market countries.
The cryptocurrency trend of the past few years has continued to grow despite widespread predictions that it would just be a flash in the pan. Blockchain is suddenly everyone's favorite buzzword. But what if there's more to this story than meets the eye? What if Digital Currency is about to change the world in ways beyond our imagination? And what if geopolitical forces our politicians don't even understand have already inspired China and Russia to use Digital Currency to attack the U.S. Dollar's dominance over the global financial system?The Dollar has served as the world's reserve currency since 1944, and the fringe benefits have allowed the U.S. Government to borrow and spend beyond its means and run massive trade deficits for decades. Now China and Russia suddenly have a new lever to use which could upset the global balance of power. Who would have guessed that technology breakthroughs conceived by the inventors of cryptocurrency would hand China and Russia just the weapon they needed to attack the Dollar's rule over the global economy? The invention of digital cash enables government-issued digital currency systems that could completely modernize the global monetary system. The potential benefits to society are so great that it's hard to grasp their full magnitude. But a digital currency system introduced by China and Russia could upstage the Dollar and replace it as global reserve currency, causing devastating consequences for the U.S. economy. Which country wins the new digital currency Space Race could change the course of human history.There's plenty of evidence that China and Russia are already hard at work. The Chinese central bank is aggressively hiring Blockchain engineers, but has been suspiciously quiet about what they're working on. Sergei Glaziev, economic advisor to Russian President Vladimir Putin is giving keynote speeches to Blockchain conferences. The Chinese central bank filed more digital currency patents than anyone else in 2017. This book explains why China and Russia are suddenly so interested in Digital Currency technology, and more importantly, what they plan to do with it. Time is short for the U.S. Government to wake up and recognize the threat that now looms over the U.S. Dollar's dominance at the center of the global financial system, and why Digital Currency technology is likely to be the challengers' weapon of choice to defeat the Dollar.Author Erik Townsend is uniquely qualified to sort this puzzle out and tell the entire fascinating story. In his first career, Townsend was a distributed systems architect - an expert in all the technologies used to create cryptocurrencies. In his second career, he was a hedge fund manager who studied reserve currency status extensively. Townsend first gives readers an introduction to both conventional money and digital currency, then gives a detailed introduction to relevant monetary history subjects, and finally ties it all together and explains how a state-sponsored digital currency system could steal the title of global reserve currency from the U.S. Dollar and change the balance of world power.
