I listened to BoE Deputy Governor Ben Broadbent’s speech on digital currencies today. It’s a tour de force.
One line of thought that one might be tempted into is the following. Because Bitcoin is not widely used as a unit of account, it won’t grow as a medium of exchange. And, completing the self-reinforcing feedback loop that favours the status quo, if it does not grow as a medium of exchange, there is no chance it will become a unit of account.
However, the ubiquity of smartphones, and information about exchange rates between digital currency, goods and other currencies, might obviate the need for a conventional, common unit of account.
Smartphones plus free, high frequency, exchange rate data, enable me and those I trade with to check what I could get for my Bitcoin [or similar].
There have been many instances in the past when there were multiple units in which prices were posted. In gold, silver, and private banknotes. Coping with that then was no doubt a headache. But in the near future, perhaps less so. The smartphone does the mental arithmetic, and avoids the need to remember anything.
Following this logic, smartphone technology plus information may make the fact that Bitcoin is not a unit of account less of an issue in its growth as a medium of exchange.
We have observed that central banks have lost control over what is used as money in some economies. But typically only when the currency was spectacularly abused for seigniorage purposes, as in Zimbabwe. However smartphone and related technology might make the threshold for misbehaviour at which these dynamics begin lower.
All this puts to one side the current problems actual digital curency communities like Bitcoin are experiencing, of course. Which seem to be many and serious right now.