Bitcoin Is Not a New Type of Money

Michael Lee and Antoine Martin

No 20200618, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Bitcoin, and more generally, cryptocurrencies, are often described as a new type of money. In this post, we argue that this is a misconception. Bitcoin may be money, but it is not a new type of money. To see what is truly new about Bitcoin, it is useful to make a distinction between “money,” the asset that is being exchanged, and the “exchange mechanism,” that is, the method or process through which the asset is transferred. Doing so reveals that monies with properties similar to Bitcoin have existed for centuries. However, the ability to make electronic exchanges without a trusted party—a defining characteristic of Bitcoin—is radically new. Bitcoin is not a new class of money, it is a new type of exchange mechanism, and this type of exchange mechanism can support a variety of forms of money as well as other types of assets.

Keywords: cryptoassets; cryptocurrencies; classification; bitcoin; money; exchange mechanism; payments (search for similar items in EconPapers)
JEL-codes: E42 E5 G21 (search for similar items in EconPapers)
Date: 2020-06-18
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
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