The emergence of digital money has raised important questions pertaining to the nature and function of money.
In Economics 101, we are told that money performs three key functions: store of value, unit of account, and medium of exchange.
By this definition, cryptocurrency has served as a medium of exchange and unit of account. The growing list of merchants who are willing to accept cryptocurrencies as payment speaks of its role as medium of exchange, while the creation of trade of cryptocurrencies on highly transparent and secure distributed ledgers known as blockchains ensures that all transactions are accounted for.
However, the collapse of major crypto firm FTX, the stablecoin Terra and its reserve asset cryptocurrency Luna has shown that cryptocurrencies are not reliable stores of value. Millions of dollars have been wiped out with these collapses and other notable crypto scams (or “rug pulls”) amidst what has come to be known as the “crypto winter”.
To read the full article, click here.
The writer is senior research fellow at the Institute of Policy Studies, National University of Singapore.
Top photo from Unsplash.