Question

From a macroeconomic perspective, what are the challenges (and opportunities), of allowing privately issued crypo currency like Bitcoin replace currencies issued by sovereign governments?

Answer 1

crypto currencies like bitcoin are issued by private enterprises and has no certain limit on its supply. if no government authority is supplying it then there will be no or less control over its transaction and supply. and as we know its a replacement to the fiate currency it will drive the economy in whichever direction it wants it to. if supply of bitcoin increases the value of it will decline and if supply of it sucks in the market then the entire economy will be in trouble. as there is no limit to its transaction and there is no formal source of supply the black market or parallel economy will run side by side. it will be difficult to stop illigal activities to stop as the transaction will be in the form of internet money. in the transaction of crypto currencies a lots of energy is needed as small little fraction is being used for transaction and solving the mathematical problems high energy computers are needed and it consumes lots of energy to run. one advantage of it is that unlike paper currecncy it cannot be duplicated or faked. and also as it is transacted online a person doesnot need to carry cash in hands all the time.