Eternal Coins? Control And Regulation Of Alternative Digital Currencies

The rise and scams of cryptocurrencies have attracted much public, academic, and economic attention. While most cryptocurrencies have already failed, less attention has been given to the long-term regulation of those that might be successful, all of which purport to be 'eternal' stores of value or mediums of exchange. Now is a good time to review this experience and draw lessons for regulators, investors, and promoters interested in better management of risk around alternative currencies, and cryptocurrencies in particular. This paper concludes that conventional risk control concerns are relevant even when a technology is novel. The typical choice of blockchain technology with proof-of-work all but guarantees that efficiency concerns are material, and that the purely digital nature of cryptocurrencies offers opportunities for regulators to insist on comparison of outcomes with simulation modeling as one basis for regulatory control.