Nonetheless, the same two questions apply to both categories: Are they viable? And, if so, do they benefit society? While humility requires that we not claim certainty about the answer to the first question, the second must be met with a resounding no. Crypto innovation undoubtedly has some valuable features — including blockchain-based applications, smart contracts, and decentralised finance — but the proliferation of private digital assets has also widened the gap between private and social interests.
The fascination with cryptocurrencies shows no sign of fading. With the passage of the Guiding and Establishing National Innovation for US Stablecoins (Genius) Act in July, US lawmakers added to the sense that crypto is here to stay. But look beyond the hype and an uncomfortable issue remains unresolved: Are cryptocurrencies a genuine innovation capable of serving the common good, or a speculative threat to financial and social stability?
Of course, not all cryptocurrencies are alike. Unbacked cryptocurrencies, such as Bitcoin or Ethereum, have no underlying assets and derive their value solely from people’s belief in their value. But backed cryptocurrencies, including stablecoins, attempt to anchor their value through holdings of real-world assets, such as dollars or short-term government bonds.
