Revisiting the Properties of Money
It addresses a foundational gap in economics for policymakers and researchers by updating monetary theory for the digital era, though it is incremental as it builds on existing frameworks.
This paper tackles the problem that traditional properties of money, defined in the 1800s for physical currencies, do not adequately describe modern digital forms like cryptocurrencies and CBDCs, by conducting the first exhaustive review to identify and define properties for all physical and digital money within an expanded framework.
The properties of money commonly referenced in the economics literature were originally identified by Jevons (1876) and Menger (1892) in the late 1800s and were intended to describe physical currencies, such as commodity money, metallic coins, and paper bills. In the digital era, many non-physical currencies have either entered circulation or are under development, including demand deposits, cryptocurrencies, stablecoins, central bank digital currencies (CBDCs), in-game currencies, and quantum money. These forms of money have novel properties that have not been studied extensively within the economics literature, but may be important determinants of the monetary equilibrium that emerges in the forthcoming era of heightened currency competition. This paper makes the first exhaustive attempt to identify and define the properties of all physical and digital forms of money. It reviews both the economics and computer science literatures and categorizes properties within an expanded version of the original functions-and-properties framework of money that includes societal and regulatory objectives.