Trends in crypto-currencies and blockchain technologies: A monetary theory and regulation perspective

The internet era has generated a requirement for low-cost, anonymous and rapidly verifiable transactions to be used for online barter, and fast settling money has emerged as a consequence. For the most part, electronic money (e-money) has fulfilled this role, but the last few years have seen two new types of money emerge — centralized virtual currencies, usually for the purpose of transacting in social and gaming economies, and cryptocurrencies, which aim to eliminate the need for financial intermediaries by offering direct peer-to-peer (P2P) online payments. We describe the historical context that led to the development of these currencies and some modern and recent trends in their uptake, in terms of both usage in the real economy and as investment products. As these currencies are purely digital constructs, with no government or local authority backing, we discuss them in the context of monetary theory, in order to determine how they may be valued under each. Finally, we provide an overview of the state of regulatory readiness in terms of dealing with transactions in these currencies in various regions of the world.