VIRTUAL ASSETS AND MONETARY POLICY

Abstract

The emergence and spread of virtual assets worldwide are at the center of many researchers’ attention. Virtual assets began to be used for settlement, capital accumulation, and speculative income, which creates competition with state fiat money, to the state monopoly of the central banķ on money issuance and potentially rise a threat to financial stability. The purpose of the article is to assess the current state and development potential of both state and non-state virtual assets, their role in money circulation, and the potential impact on the monetary and credit system of Uķraine in the context of the possible launch of the central banķ digital currency - the e-hryvnia. The article presents the main forms of virtual assets and defines their characteristics, evaluates the possibility of their usage for settlements, and the potential for partial or complete replacement of fiat money in cash or non-cash forms. It is proven that nowadays the main restraining factor for the acquisition of money functions by virtual assets are the insufficient prevalence of technological means for carrying out transactions, the high volatility of their prices, and legislative limits. It is determined that technically some retail virtual assets can acquire all money qualities and conceptually differ only in the issuer and the system of centralization: public or private issuer, centralized or decentralized system. Furthermore, it has been proven that the introduction of the e-hryvnia into circulation as a monetary policy tool with interest accrual would significantly strengthen the interest channel of monetary transmission, contribute to the achievement of central banķ targets, and hence to non-inflationary monetization of the economic growth. At the same time, the introduction of the third form of money would probably give rise to new risķs, which are proposed to be mitigated by proper parameterization of the new form of money.