Hayekian currency competition prior to and after cryptocurrencies: A critical review

Abstract

The invention of the internet and the popularisation of the same in the late 1990s triggered a cascade of inventions and innovations that have truly been revolutionary. One such innovation is the blockchain. The blockchain revolution and the proliferation of crypto tokens that claim to be money substitutes (or money) have increased the belief that the private issue of money and currency competition, as proposed by Hayek, could actually work. This study sought to determine if there is a change in opinion regarding the proposal for the denationalisation of money prior to, and after the proliferation of cryptocurrencies, and whether cryptocurrencies are indeed the realisation of Hayek’s proposal. It is concluded that while the reception to Hayek’s proposal was mostly critical prior to the electronic money and later the cryptocurrency revolution, the reception post cryptocurrencies is that of critical reexamination and re-interpretation with cautious hope and apprehension. In line with the literature, it is also concluded that Hayek’s proposal is realised almost exactly in off-chain custodial stablecoins. Concluding remarks on the future of blockchainbased currency competition and the impact of regulation are offered.