By redistributing power away from the government and Wall Street and to the people, cryptocurrency will democratize finance, enthusiasts of the digital money say.
Economist Eswar Prasad, however, foresees a more complicated and, at times, dangerous reality.
In Prasad’s telling, bitcoin is likely one long-lasting bubble, and digital money could leave the government with more control than ever, while making wealth inequality much worse. He sees other risks, too.
“Cryptocurrencies may contribute to monetary and financial instability, especially if they were to spawn a large and unregulated financial system that lacks investor protection,” he said.
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CNBC spoke with Prasad, an economics professor at Cornell University and a research associate at the National Bureau of Economic Research, about the predictions in his new book, The Future of Money, published by Harvard University Press. The exchange has been edited and condensed for clarity.
Annie Nova: What does the emergence of cryptocurrencies tells us about what we want from money?
Eswar Prasad: There’s a sense that the way the financial system is set up right now favors those who are already wealthy, that a lot of the investment opportunities are only available to them. And I think there is a desire to level the playing field. Cryptocurrencies could allow you to