Abstract
With the continuous development of computer and blockchain technology, digital currency has gradually replaced some functions of legal tender. This paper investigated the impact and the feasibility of digital currency on the financial market. Combining the money demand theory of Karl Heinrich Marx and Milton Friedman respectively, we discussed the impact of electronic and cryptocurrencies on the amount of money in circulation. Then, through further empirical analysis, we conclude that in China, digital currency has a substitution effect on current deposits in the long term. Furthermore, the welfare effect level of different countries adopting different policies on digital currency is analyzed by using the local equilibrium model of tariff effect in small countries, and the policy choice of maximizing the total welfare level is discussed based on game theory. Finally, we put forward some suggestions on establishing the global financial supervision system.
Highlights
In 2008, the global financial crisis broke out, and countries adopted quantitative and accommodative monetary policies in order to transfer losses
Electronic money has a major impact on V, C1 (Precipitating money in financial markets), C2 (Bank reserve), C3 (Funds reserved by individuals for emergency response) & T. 3.1.1 The Influence of Electronic Currency on “V” Third-party payment platforms such as Paypal and electronic payment methods such as bank cards, which were invented before, have undoubtedly accelerated the circulation of money
We can see that both electronic currency and decentralized cryptocurrency have a small impact on the demand and supply of money today, and their development has a different impact on currency with different structures
Summary
In 2008, the global financial crisis broke out, and countries adopted quantitative and accommodative monetary policies in order to transfer losses. Advocates of non-nationalized private currencies believe that using blockchain technology to create private digital currencies could avert an economic crisis. The biggest feature of private money is decentralization, not relying on central bank credit, and is independent of the “currency” system under the central bank. The latest news shows that Bitcoin’s payment function is further recognized and supported. Merchants from more than 200 countries accept bitcoin. There are more than ten well-operated trading platforms worldwide, and daily www.scholink.org/ojs/index.php/jepf
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