Monetary Policy and Cryptocurrencies: Much Noise for Nothing?

Abstract

At the beginning of 2017, there were more than 500 digital currencies (DC) for a total market value of $ 16.8 billion or € 16 billion, the Bitcoin, launched in early 2009, representing alone about 85% of the market. In comparison, euro banknotes and coins in circulation at the end of 2016 amounted to EUR 1 150 billion, 72 times more, for the single currency in fiduciary form. However, some authors have suggested that increased use of DCs could, at some point and under certain circumstances, have profound consequences for the financial system and the conduct and effectiveness of monetary policy (Raskin and Yermack, 2016; Bordo and Levin, 2017). Under the same hypothesis that the consequences of monetary policy can only be significant if the use of DC was widespread, this article offers a more nuanced view. The first part recalls the main characteristics of DCs. The third part looks at Consequences and adjustments of monetary policy from widespread use of digital currencies. In this part, we describe scenarios of widespread use of DCs and their consequences for monetary policy. The fourth part concludes.