Cryptocurrencies as a driver of innovation for the monetary system

In this paper we outline a theory of cryptocurrencies that parallels the standard theory of money. We evidence that cryptocurrencies satisfy some but not all conditions that qualify a medium of exchange as money. Specifically, the process of creation and distribution of cryptocurrencies significantly differs from that of money impacting trust and value creation. New form of cryptocurrencies, such as central bank digital currencies, are considered. We outline scenarios of future evolution of cryptocurrencies and how they might be adopted by central banks to replace cash and/or to have direct interaction with the public.