bitcoins and cash

Xavier Freixas (UPF and BSE) spoke with the Ara newspaper about the decline of cash and the emergence of new types of payment. Can bitcoin and other types of cryptocurrencies be considered to be "money"?

Here are some excerpts from Prof. Freixas' commentary (original in Catalan):

Several financial products that some investors consider money in reality are not and should be described as mere assets, sometimes speculative. One case is bitcoin. "I have not seen any prices expressed in bitcoins...Money is a reserve of value that is liquid and bankable," and its users must have full confidence in the system. "Cryptocurrencies inspires limited confidence," Freixas says, not only because they are created by their users, but also because, to date, their value has fluctuated a great deal, which makes them unusable as a measure and reserve of value.

Another different between cryptocurrencies and traditional money is the lack of government control and traceability. "It's not clear who or what is behind bitcoin," says Freixas. There is no central bank to control the issue of currency or the price, both in relation to other foreign currencies (exchange rate) as well as well as in relation to the goods and services of the economy, that is, inflation.

What would happen, however, if a trusted entity that was not a state decides to issue its own currency? "Then it could compete with traditional currencies," says Freixas. Thus, large multinational companies, such as Amazon, could create their own money units that would compete with the euro, the dollar and the rest of the currencies. "Money is a pure bubble," Freixas says, meaning that it has a specific value because everyone decides it does, not because it has an value on its own. This means that the consumer "can expect to buy things the next day" with that money. If the clients of a large company decided to use a private currency that maintained long-term stability, it would become a real alternative to the currencies issued by states.

Other recent updates

Andre Groeger and Hannes Mueller win 2023 Spanish Society of Statistics and Operations Research – BBVA Foundation Award

A paper co-authored by BSE Affiliated Professors, Andre Groeger (UAB, MOVE and BSE) and Hannes Mueller (IAE-CISC and...

Screenshot from Real-Time Economics portal

Real-Time Economics portal wins National Public-Private R&D Partnership Prize

A research team led by José García-Montalvo (UPF and BSE) that also includes Ruben Durante (UPF and BSE) and ...

CaixaBank Research
portrait of Mridula Duggal

IDEA PhD candidate Mridula Duggal is a finalist for the 2023 ECB Young Economist Prize

The European Central Bank has announced the finalists for the 2023 ECB Young Economist Prize, and among them is ...

European Central Bank
podcast cover art

University of Chicago podcast: "Does Bad Government Breed Populism?"

Professor Giacomo Ponzetto (CREI, UPF and BSE) spoke about his research on this subject with the University of Chicago Harris...

University of Chicago