What are the barriers to the acceptance of cryptocurrencies in the German economy? (PDF)

Master's Thesis from the year 2018 in the subject Economics - Monetary theory and policy, grade: 1,3, University of applied sciences, Munich, language: English, abstract: The term 'Cryptocurrencies' evolved as an imperfect form of memory, one which fits somewhere in between commodity money and fiat money, a synthetic commodity money. Regardless, of its technological and monetary benefits, cryptocurrency lack to attract larger parts of the German population. With the use of an active research approach, this research paper utilizes three different work cycles to identify the potential. Further insights from qualitative sources including an intensive literature review on the types and functionalities of money, case studies of potential consequences that private or state-owned cryptocurrencies have on the economy, and expert interviews will support to identify the macroeconomic and social barriers towards the acceptance of cryptocurrencies in the German economy. Cryptocurrencies characteristics follow Austrian economic principles which clash with the current fiat-money system. Broader adaption of cryptocurrencies would weaken the government's monetary policy tools, whereby the European Commission stands ready to take regulatory actions against such a scenario, but shows no further indications to implement a central bank digital currency of its own.

The findings show that the intrinsic aspects of private cryptocurrencies, like Bitcoin, perceivably creates an unsecured, unfamiliar and unregulatable, even criminal, playfield for most of the German citizens. Whereas most cryptocurrencies provide a strong potential to act as a better medium of exchange, it's deflationary characteristics of being limited in supply and un-controllable features make most cryptocurrencies a less valuable unit of account and store of value, due to high price fluctuations that are solely affected by the demand and perception of its users. Government regulations and negative sentiment of national media communicate Bitcoin as a risky financial asset and further falsely highlight its limited use to act as a currency. German citizens have a strong saving culture and high trust in the Euro and fore mostly neglect risky financial investments. A further lack of retailer acceptance of cryptocurrencies as a payment method has dispirited a potential network effect, which is a fundamental requirement for a successful adoption of new technology.