Research shows that cryptocurrencies have three positive effects on the existing monetary system

The existence of private, decentralized cryptocurrencies such as Bitcoin could have a healthy impact on government fiscal and regulatory policies, a new study argues.

This view is put forward by three researchers in their paper "How do private digital currencies affect government policy?" They believe that when it comes to the global financial system, the impact of cryptocurrencies is not limited to whether they are used by the majority of the population.

The author of the article believes that cryptocurrencies can be used to test fiscal and regulatory policies. Although cryptocurrencies may not replace the US dollar at present, their positive impact on the existing monetary system can be reflected in three aspects.

First, citizens can benefit from the existence of cryptocurrencies because they provide a variety of options. In addition, private digital currencies can curb monetary policy, thereby generating lower inflation.

Secondly, cryptocurrencies can encourage local investment and serve as a complement to that investment rather than a substitute. In the process, they will constrain monetary policy, such as reducing inflation, and thus bring higher returns on investment.

Third, governments also benefit from the use of cryptocurrencies in their local economies, as they can generate revenue through taxation and benefit from investments in the local area.

The paper’s authors also argue that “private digital currencies are important in emerging markets facing crises, where there is a high risk of instability and governments will only make policies based on their own interests without considering the interests of their citizens.”

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AuthorLiang CHE

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