The potential effects of cryptocurrencies on monetary policy

All current cryptocurrencies are controlled by private entities, so that the issue of impact on monetary system becomes very important. Autonomous decisions by private entities concerning the money supply could diminish the ability of central banks to implement monetary policy effectively. The subject of this paper is the influence of alternative cryptocurrency forms on the monetary system. The aim of this paper is to determine the ability of central banks to conduct monetary policy successfully in conditions of widespread use of cryptocurrencies in payment transactions. The situation in the cryptocurrency market is compared with the phases of Internet development and the current situation on other markets of electronic payment systems. It is concluded that cryptocurrencies do not have the capacity to endanger the traditional monetary system at the current level. Bearing in mind the early maturity of this market, certain predictions of possible future trends have been made. In the case of private cryptocurrency usage growth, central banks could partially or completely lose influence over monetary policy. The proposed solution is the development of national cryptocurrencies that would ensure the retention of seigniorage to central banks and the prevention of further use of private cryptocurrencies in criminal activities.