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Cryptocurrencies: Review of Economics and Policy

Sonan Memon
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Sonan Memon: Pakistan Institute of Development Economics

No 2022:7, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: In this review paper, I begin by discussing crypto’s market penetration, legal status, and economic opportunities for Pakistan. I mainly focus on the economics of digital “currencies”. Key questions include how does crypto “currency” compare with traditional fiat currencies as a substitute? Which economic problems does it currently solve or have the potential to solve (e.g. lowers verification and networking costs)? What are its economic limitations (e.g. high energy costs, speculative bubbles, prohibitive costs of maintaining incentive compatibility and the blockchain trilemma)? How does the widespread adoption of digital currencies change the monetary and fiscal policy paradigm? Which set of regulations are needed from policymakers to address crypto’s adverse effects, such as accommodating illicit activities and threatening consumer protection? In the appendix, I also summarise the design features of the technology that underlies cryptocurrencies.

Keywords: Cryptocurrencies: Bitcoin; Ethereum; Tether etc; Blockchain Technology; Economics of Cryptocurrencies; Implications for Fiscal and Monetary Policy; Regulation of Crypto Market (search for similar items in EconPapers)
JEL-codes: E00 E31 E40 E41 E42 E43 E44 E50 E58 E62 F33 (search for similar items in EconPapers)
Pages: 27
Date: 2022
New Economics Papers: this item is included in nep-cba, nep-mon and nep-pay
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