At this moment, the book can be freely downloaded in PDF format from the Institute of Economic Affairs website.
Both Hanke and Dowd are persuaded that cryptocurrencies are the way of the future, with broad implications that are extremely profound.
The intermediary-free, digital transactions characteristic of cryptocurrencies such as Bitcoin are an important step towards exchanges free of regulatory meddling. In addition, this technology should enable low-cost banking accessible to anyone with a cellphone. Indeed, cryptocurrencies should improve access to financial services in developing countries and elsewhere because they will complement existing services that now rely on standard currencies (see the M-Pesa in Kenya).
However, both Hanke and Dowd are also persuaded that the volatility of the Bitcoin price is an important problem that will force the currency Bitcoin to make way for other cryptocurrencies.
“Though the supply of Bitcoin is limited, the demand is very variable; this variability has made its price very uncertain and created a bubble-bust cycle in the Bitcoin market. Perhaps the safest prediction is that Bitcoin will eventually be displaced by alternative cryptocurrencies with superior features.”
The concerns expressed by the Cato Institute are certainly legitimate. There are services like Bitreserve that shield end users from the volatility of Bitcoin price by converting their bitcoins to fiat equivalents on-the-fly, but if most users immediately convert their bitcoin to fiat then the price of Bitcoin goes down.
The Cato Institute is a public policy research organization – a think tank – dedicated to the principles of individual liberty, limited government, free markets and peace. Its scholars and analysts conduct independent, nonpartisan research on a wide range of policy issues.
Images from Institute of Economic Affairs and Shutterstock.