Academics and the media often talk of cryptocurrencies as a technological innovation, or discuss the economic and regulatory challenges posed by them. Much less attention is given to the possibility that digital currencies may promote and enable social change. But cryptocurrencies may provide opportunities to democratize credit and investment, financial services, enable small-scale international transactions, and provide an alternative store of value to protect savings from less stable national fiat currencies. The result could be opportunities for social mobility and wealth creation for those amongst the poorest in society.
Burgeoning government debt is now the rule rather than the exception, and many people would argue that fiat money has been a major factor in it’s growth. That opinion holds that today’s money regime, or fiat, is economically and socially destructive. It is inflationary, it corrupts society’s morals, and it benefits the few at the expense of everybody else. Those who hold that opinion assert that fiat money invariably leads to indebtedness, boom and bust cycles, and crippling depressions. At best, they say, fiat systems represent a safe means for bankers and those in political office to leverage the system in their favor and unfairly enrich themselves at the expense of the society they purport to serve.
In contrast, digital currencies remove arbitrary power over the money supply, mitigate currency exchange-rate risk for foreign firms, and encourage trade regardless of national economic performance. Because digital currency is not leveraged nor created as debt like fiat, funds are always available from an account the moment they are requested. The exchange rate of an internationally accepted cryptocurrency would be set by a much larger international user base than is possible with any national fiat currency; savings held in digital money are exempt from the impact that local political turmoil has on national currencies. This means a globally accepted digital currency has a much improved long-term stability and trade prospectus than any fiat regime.