from the Philadelphia Fed
— this post authored by Daniel Sanches
Ever since the U.S. established a single currency in the 19th century, the idea of private money has evoked panics and bank failures. In the cryptocurrency era, can the dollar stay sound?
A central proposition in economics is that competition is good. Free markets are typically the most efficient way to provide people with the goods and services they want and to allocate resources and organize economic activity throughout the economy. Despite the logic of the argument, there is one element of this economic activity that even ardent proponents of laissez-faire economics have been afraid to leave to the vicissitudes of the free interchange of supply and demand: money. Historically, the issuance and oversight of currency have been considered strictly the province of government, and the idea of currency competition has been associated with financial instability. Indeed, for 150 years, U.S. financial firms such as commercial banks had been prohibited from issuing currency. And even though financial deregulation in the past two decades has provided U.S. banks with the opportunity to issue electronic currency to compete with official money, banks have not ventured into the business of private currency issuance.
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Source
https://www.philadelphiafed.org/-/media/research-and-data/publications/economic-insights/2018/q2/eiq218-bitcoin.pdf?la=en
