An Investigation on the Crypto currencies and its future

Abstract

Crypto Currencies (CC) have recently become one of the most debated topics in the public opinion. One of the most fundamental reasons for this is that the fluctuations in transaction volumes and prices of CCs that emerged in 2009 have increased visibly in recent years. CCs have many direct and indirect effects on the global monetary system and the world economy. At this point, as well as the factors that lead to the emergence of CCs, the change and transformation process that CCs create in the world economy is also very important. One of the factors that will determine the degree of future expansion of CCs will be the functions of money. The degree of which CCs can fulfill the functions of the classical currencies will have a direct impact on the process of CC dissemination. CCs cannot fulfill the appraisal function at this time. The most basic reason for this is the excessive fluctuations in prices of CCs. This volatility prevents economic units from valuing any goods and services using CC and leads to preclude the spread of CCs. However, since this fluctuation will persist over time, CCs will begin to fulfill the function of appraisal and the spread will accelerate. The power of governments to direct economic and monetary policy will change and transform with the spread of CCs. The effect of this change and the extent to which the states will allow this change remain unclear. Besides, how CCs will affect the global reserve money system is also very important. It remains unclear whether the CCs will be used as reserve currency in the future and how the major central banks will react to it. CCs are also closely related to the seigniorage income. As the CCs become widespread, the seigniorage income which the major central banks obtained from the banknotes will also be jeopardized. The question of how states and central banks will react to this should also be discussed. Measures that are taken against crypto-currencies by the central banks, whose seigniorage incomes decrease, will be determinant of the global reserve money system. The purpose of this study is to foresee the future of the global reserve money system with the emergence of CCs and how the seigniorage incomes of central banks will be affected from this process.