Money, Banks and Finance in Economic Thought

The Economy of Bitcoin and Crypto-currencies : a Schumpeterian perspective

Lakomski-Laguerre Odile, CRIISEA, University of Picardie Jules Verne

Bitcoin and the majority of cryptocurrencies are based on blockchain technology: a ledger contains all encrypted transactions for every unit of currency, hence there is no central authority verifying the validity of payments. In other words, since Nakamoto launched his bitcoin program in 2008, cryptocurrencies are issued without the backing of the banking system, and outside state control. So, they are challenging the traditional design of money as unitary, territorialized and centralized system. Consequently, they raise theoretical problems and renew the debate on the nature of money. Firstly, as decentralized systems and thanks to encoding procedures, there is no third party issuing monetary units and checking the payments. Secondly, reminiscent to a metallist conception of money, Bitcoin was designed so to make digital currency primarily a good store of value. Contrasting with this, Schumpeter theorized money as a "social accounting" and considered that both metallism and the function of store of value were not relevant for modern monetary theory. He also focused on the key role of credit and banking in the evolutionary process of capitalism and put forward monetary organisation as necessarily centralized and hierarchized, with an important role devoted to the central bank. In this paper, we use a Schumpeterian grid as a mirror in order to stress the disruptive character of Bitcoin and its technology, regarding to capitalism as a credit-led economy founded on institutional regulation, and to reveal the tensions and contradictions in the design of Bitcoin to actually function as money. If the analysis of cryptocurrencies can be built on the traditional main functions of money, we also use a Schumpeterian grid, focusing on economic sociology, to recall that money is not only a technical device, but must also be considered in its "ideal-typical" form which is linked to a special kind of capitalist order. So, what would be the kind of capitalism produced by crypto-currencies?

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Keywords: Bitcoin, Schumpeter, social accounting, banking, credit, metallism, decentralization versus centralization, financial intermediation.