Digital currencies in the context of modern monetary theory

Malidovskyi Yevhen
third-year postgraduate student at the Department of Banking, Odesa National Economic University, Odesa, Ukraine, E-mail:emccpb@gmail.com, ORCID ID: https://orcid.org/0009-0005-7611-5079

Cite this article:

Malidovskyi Ye. (2024) Digital currencies in the context of modern monetary theory. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Tsyfrovi valiuty v konteksti suchasnoi monetarnoi teorii; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 10 (323), pp. 70-80.

Abstract

The purpose of the study is to clarify the features of various types of digital currencies in the context of modern monetary theory. Methods of analysis and synthesis, induction and deduction, analogy, system approach, scientific abstraction and generalization were used to solve the tasks. Digital currencies are becoming increasingly important in the modern economy as they change traditional perceptions of money and financial systems. In the context of modern monetary theory, digital currencies can influence monetary policy, creating new opportunities for monetary instruments. Researching this issue is relevant for understanding the future of finance and economic stability. The article aims clarification of different types of digital currencies in the context of modern monetary theory. The study revealed the essence of digital currency and defined its functions compared to fiat currency. The function of a means of circulation is performed by all types of digital currencies, however, private decentralized currencies, their use as an intermediary in the process of exchanging goods is determined depending on the trust in the issuer. The function of a measure of value is performed by digital currencies of central banks, stablecoins, and cryptocurrencies - only in certain cases. All digital currencies can perform the function of storing value under certain conditions. The study also identifies the features of modern monetary policy in connection with the development of digital currency. The intentions and practical steps towards the introduction of Central Bank of a number of states (including Ukraine) as a third form of modern money indicate the real demand for the basic provisions of MMT - the primacy of public spending over state revenues, and the monopoly of the central bank on the issuance of digital currency - CBDC. The transition of modern countries to the CBDC will allow their central banks to better manage the circulation (creation, storage and movement) of money, increase the effectiveness of the monetary policy transmission mechanism and respond more adequately to business cycles. The creation of the payment and clearing infrastructure of the CBDC based on blockchain technologies will significantly reduce costs and increase the efficiency of the entire monetary and credit system of the modern state, both banking (commercial banks and nonbanking credit organizations) and para-banking (insurance and other organizations of the insurance market; pension, investment and financial funds, dealer, brokerage and other professional securities market participants; leasing, pawnshop, factoring and other non-credit financial organizations). The implementation of the CBDC will allow central banks to significantly strengthen control over monetary and credit relations in the modern state, and create more effective mechanisms for preventing fraud, money laundering, terrorist financing, etc.

Keywords

currency, digital currency, monetary theory, MMT, digital currency of central banks.

JEL classification: E420; E440; E580; DOI: https://doi.org/10.32680/2409-9260-2024-10-323-70-80

UD classification: 336.71: 339.7

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