In view of the history of money, is the (crypto)currency a possible future for European governments ?

Details

Supervisors

Colmant, Bruno

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion
Master [120] en ingénieur de gestion

Abstract

In this thesis, we have explored the following problematic: In view of the history of money, is the (crypto)currency a possible future for European governments? First, to answer this question, we have made an historical review of the different shapes money took throughout history, going from the shells to the cryptocurrencies. Early in the ancient times, currency held an intrinsic value, like gold coins for instance, until John Law issued the first notes which then separated the intrinsic value and the representation of such a value. We saw later on that once the government was in charge of printing the currency, the public institution was not always worthy of such a power and the general trust in governments was lost. Indeed, uncontrolled notes printing policies have led to financial catastrophes that had to be paid off by the citizens (F. Hayek). Secondly, we have studied the impact for a state and for its citizens of the introduction of a (crypto)currency handled by the state. Among other things, the blockchain technology offers traceability and security but also concerns about the privacy of the citizens. “Crypto” is purposely written between parentheses in this case as it means “hidden” and a (crypto)currency handled by a state would not be secretive anymore. We have narrowed down our study to monetary ecosystems. We have studied the work of B. Lietaer showing us that such ecosystems increase the resilience of the financial system and therefore increases the quality of the system. Finally, we have come to two scenarios that answer our problematic. In the first scenario, a government replaces its national currency by a (crypto)currency. This would lead to a similar situation as Chicago Plan where state money would be simply a stock that the government can inflate and deflate but the money creation by the commercial banks would likely disappear. Of course, for this scenario’s advantages to outweigh the disadvantages, the state has to be trustworthy. But as we learned, along with history, governments were often unworthy of such the privilege to issue money. Therefore, we do not consider this option as viable in a near future. In the second scenario, we consider that a government would launched a second currency, a (crypto)currency, as an alternative following the vision of B. Lietaer. We consider that, if this is done with clairvoyance, such a launch could lead to a positive situation similar to the WIR in Switzerland but with the additional advantages of the blockchain technology. Therefore, we believe this scenario is more plausible in a near future.