New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and facilitate cross-border transfers.
It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.
Bitcoin and its peers have mostly remained on the fringes of finance and payments, yet some countries are actively considering granting cryptoassets legal tender status, and even making these a second national currency.
If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes, like notes and coins (currency) issued by the central bank.
Countries can even go further by-passing laws to encourage the use of cryptoassets as a national currency, that is, as an official monetary unit & a mandatory means of payment for everyday purchases.
Households and businesses would have very little incentive to price or save in a parallel cryptoasset such as Bitcoin, even if it were given legal tender or currency status.
If goods and services were priced in both a real currency and a cryptoasset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities.
Similarly, government revenues would be exposed to exchange rate risk if taxes were quoted in advance in a cryptoasset while expenditures remained mostly in the local currency, or vice versa.
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