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The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
A cutting-edge look at how accelerating financial change, from the end of cash to the rise of cryptocurrencies, will transform economies for better and worse.
We think we’ve seen financial innovation. We bank from laptops and buy coffee with the wave of a phone. But these are minor miracles compared with the dizzying experiments now underway around the globe, as businesses and governments alike embrace the possibilities of new financial technologies. As Eswar S. Prasad explains, the world of finance is at the threshold of major disruption that will affect corporations, bankers, states, and indeed all of us. The transformation of money will fundamentally rewrite how ordinary people live.
Above all, Prasad foresees the end of physical cash. The driving force won’t be phones or credit cards but rather central banks, spurred by the emergence of cryptocurrencies to develop their own, more stable digital currencies. Meanwhile, cryptocurrencies themselves will evolve unpredictably as global corporations like Facebook and Amazon join the game. The changes will be accompanied by snowballing innovations that are reshaping finance and have already begun to revolutionize how we invest, trade, insure, and manage risk.
Prasad shows how these and other changes will redefine the very concept of money, unbundling its traditional functions as a unit of account, medium of exchange, and store of value. The promise lies in greater efficiency and flexibility, increased sensitivity to the needs of diverse consumers, and improved market access for the unbanked. The risk is instability, lack of accountability, and erosion of privacy. A lucid, visionary work, The Future of Money shows how to maximize the best and guard against the worst of what is to come.
We think we’ve seen financial innovation. We bank from laptops and buy coffee with the wave of a phone. But these are minor miracles compared with the dizzying experiments now underway around the globe, as businesses and governments alike embrace the possibilities of new financial technologies. As Eswar S. Prasad explains, the world of finance is at the threshold of major disruption that will affect corporations, bankers, states, and indeed all of us. The transformation of money will fundamentally rewrite how ordinary people live.
Above all, Prasad foresees the end of physical cash. The driving force won’t be phones or credit cards but rather central banks, spurred by the emergence of cryptocurrencies to develop their own, more stable digital currencies. Meanwhile, cryptocurrencies themselves will evolve unpredictably as global corporations like Facebook and Amazon join the game. The changes will be accompanied by snowballing innovations that are reshaping finance and have already begun to revolutionize how we invest, trade, insure, and manage risk.
Prasad shows how these and other changes will redefine the very concept of money, unbundling its traditional functions as a unit of account, medium of exchange, and store of value. The promise lies in greater efficiency and flexibility, increased sensitivity to the needs of diverse consumers, and improved market access for the unbanked. The risk is instability, lack of accountability, and erosion of privacy. A lucid, visionary work, The Future of Money shows how to maximize the best and guard against the worst of what is to come.
496 pages, Hardcover
First published September 21, 2021
About the author
Eswar S. Prasad
44 books46 followersEswar S. Prasad is the Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University. He is also a Senior Fellow at the Brookings Institution, where he holds the New Century Chair in International Economics, and a research associate at the National Bureau of Economic Research. He is the author of Gaining Currency: The Rise of the Renminbi and The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance.
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Displaying 1 - 30 of 92 reviews
February 18, 2022
I've reached out for The Future of Money because of several reasons:
- all the books about DeFi are either bullshit, cheap hype, or extremely shallow (the topic is trendy, people will buy anything) - so I wanted a book written by a true expert(s), with a more holistic approach (on markets, global economy, not just technology)
- I wanted to confront my (biased) perspective on innovation in so-called FinTech
- I needed a solid refresh of monetary politics, especially in the context of Euro (as currency)
These were the main goals and TBH, I'm far from disappointed: the book is very solid and informative, but w/o any compromises in terms of approachability. What else do I have in my notes?
1. There's a lot about stablecoins as a concept - very useful info
2. Fintech chapter is very good
3. The concept is CBDC is covered end-to-end: I don't know any better source on that
4. There were some nice details on micro-loans and peer-to-peer financing, but I expected more models to be covered - there's actually a lot of innovation in this space (some of it of questionable value for the end-users though ...)
5. The book is fair when it comes to the advantages and risks of crypto. No, it doesn't cover all the possible scenarios (e.g. NFTs as a potential bridge between the physical and digital world), but it's deep enough.
Good stuff. Highly recommended.
- all the books about DeFi are either bullshit, cheap hype, or extremely shallow (the topic is trendy, people will buy anything) - so I wanted a book written by a true expert(s), with a more holistic approach (on markets, global economy, not just technology)
- I wanted to confront my (biased) perspective on innovation in so-called FinTech
- I needed a solid refresh of monetary politics, especially in the context of Euro (as currency)
These were the main goals and TBH, I'm far from disappointed: the book is very solid and informative, but w/o any compromises in terms of approachability. What else do I have in my notes?
1. There's a lot about stablecoins as a concept - very useful info
2. Fintech chapter is very good
3. The concept is CBDC is covered end-to-end: I don't know any better source on that
4. There were some nice details on micro-loans and peer-to-peer financing, but I expected more models to be covered - there's actually a lot of innovation in this space (some of it of questionable value for the end-users though ...)
5. The book is fair when it comes to the advantages and risks of crypto. No, it doesn't cover all the possible scenarios (e.g. NFTs as a potential bridge between the physical and digital world), but it's deep enough.
Good stuff. Highly recommended.
December 15, 2021
This was exactly the book I wanted and needed on Fintech, cryptocurrencies and Central Bank Digital Currencies (CBDCs). It is comprehensive, balanced, and covers most every aspect from the range of Fintech companies to how cryptocurrencies work and their pros and cons, to how CBDCs work to their macroeconomic, international financial and regulatory implications. Ultimately the book is a very optimistic take on the general area of not many of the specific technologies (like Bitcoin) with Prasad concluding, “Financial technologies are opening up a wide vista of possibilities for improving the economic condition of humanity, especially that of the poor and economically marginalized.”
Prasad, however, does a lot more listing of pros and cons than he does of making a strong argument. I mostly appreciated that because it is a hard topic without obvious answers, it gave me a lot of the points I needed to understand better to make up my own mind (and I still have not, at least not fully), and also the answer varies so much from country to country: “A cost-benefit analysis of CBDC introduction involves a complicated calculus that hinges on a country’s particular circumstances—including the quality of its macroeconomic policies and institutions, its level of development, and the structure of its financial markets.”
Broadly Prasad's sensibilities and concerns are similar to mine although he offers more of a defense of cash on privacy grounds and more criticism of digital money and especially CBDCs on those grounds than resonated with me. He also is detailed about the downsides of Bitcoin including fluctuating value, crummy medium of exchange, vulnerability to hacking/losing/locking, mirage of anonymity, environmental transactions and illegal transactions. But he seems insufficiently alarmed about the bubble and that many of its victims could end up being the less sophisticated, potentially those with lower incomes, and those who financial inclusion was supposed to help. Also at times he talks about products that are still quite tiny but talks about millions or billions of dollars without giving the denominator against which they should be judged.
Perhaps the book's greatest strength is its discussion of the many different ways that country's are approaching CBDC's, what has been learned from them so far, and the considerations going forward. This account is exhaustive but rarely exhausting (OK, maybe I didn't need to know about the Marshall Islands' CBDC). He lays out the different types of CBDC (like Venmo, a Central Bank bank account and an official cryptocurrency that does not trade at par), the advantages they have (financial inclusion and payments system--plus reducing money laundering and other illegal activities) and also the disadvantages (draining money from banking system and potentially contributing to instability, stifling innovation, and reductions in privacy). Prasad has a lot of thoughtful ideas on how they can be structured.
Ultimately he makes a strong argument that CBDCs are only as strong as a country's institutions. Where they are not trusted (like Ecuador) they fail, where they are (like Uruguay). But overall Prasad, probably correctly, finds the most promise for CBDCs in emerging market economies: “The Fintech revolution provides an opportunity for [Emerging Market Economies] and other developing economies to leapfrog wealthier economies by rapidly adopting new and more efficient ways of conducting banking and financial transactions. It is sometimes easier for new technologies to take shape on a tabula rasa—a blank slate—rather than in a context where they must overcome resistance from vendors and end users of older technologies.”
Perhaps the only thing I missed in this book was the antitrust/competition angle. How much of a role should big tech play? Should big finance play? Does the government have a role in leveling the playing field to enable competition? Are open standards needed? Or is this all about startups and there is lots of vigorous competition already? I admit I am particularly interested in these issues, would have loved to read more.
Prasad does not have a bottom line. I don't think I have complete conviction about one either except that for the United States would do more to prevent cryptocurrencies and other DeFi products from benefiting from regulatory and tax arbitrage and would do more for consumer protection. On a CBDC, I think the Fed can afford to move slowly and carefully, see what happens in other countries, but ultimately it should probably be more in the business of improving its wholesale backbone so that different digital retail solutions can be built on top of it.
Overall, very grateful for this careful, detailed, up to the minute book and the wide range of thinking and topics that went into it--mostly I just wanted a little more.
Prasad, however, does a lot more listing of pros and cons than he does of making a strong argument. I mostly appreciated that because it is a hard topic without obvious answers, it gave me a lot of the points I needed to understand better to make up my own mind (and I still have not, at least not fully), and also the answer varies so much from country to country: “A cost-benefit analysis of CBDC introduction involves a complicated calculus that hinges on a country’s particular circumstances—including the quality of its macroeconomic policies and institutions, its level of development, and the structure of its financial markets.”
Broadly Prasad's sensibilities and concerns are similar to mine although he offers more of a defense of cash on privacy grounds and more criticism of digital money and especially CBDCs on those grounds than resonated with me. He also is detailed about the downsides of Bitcoin including fluctuating value, crummy medium of exchange, vulnerability to hacking/losing/locking, mirage of anonymity, environmental transactions and illegal transactions. But he seems insufficiently alarmed about the bubble and that many of its victims could end up being the less sophisticated, potentially those with lower incomes, and those who financial inclusion was supposed to help. Also at times he talks about products that are still quite tiny but talks about millions or billions of dollars without giving the denominator against which they should be judged.
Perhaps the book's greatest strength is its discussion of the many different ways that country's are approaching CBDC's, what has been learned from them so far, and the considerations going forward. This account is exhaustive but rarely exhausting (OK, maybe I didn't need to know about the Marshall Islands' CBDC). He lays out the different types of CBDC (like Venmo, a Central Bank bank account and an official cryptocurrency that does not trade at par), the advantages they have (financial inclusion and payments system--plus reducing money laundering and other illegal activities) and also the disadvantages (draining money from banking system and potentially contributing to instability, stifling innovation, and reductions in privacy). Prasad has a lot of thoughtful ideas on how they can be structured.
Ultimately he makes a strong argument that CBDCs are only as strong as a country's institutions. Where they are not trusted (like Ecuador) they fail, where they are (like Uruguay). But overall Prasad, probably correctly, finds the most promise for CBDCs in emerging market economies: “The Fintech revolution provides an opportunity for [Emerging Market Economies] and other developing economies to leapfrog wealthier economies by rapidly adopting new and more efficient ways of conducting banking and financial transactions. It is sometimes easier for new technologies to take shape on a tabula rasa—a blank slate—rather than in a context where they must overcome resistance from vendors and end users of older technologies.”
Perhaps the only thing I missed in this book was the antitrust/competition angle. How much of a role should big tech play? Should big finance play? Does the government have a role in leveling the playing field to enable competition? Are open standards needed? Or is this all about startups and there is lots of vigorous competition already? I admit I am particularly interested in these issues, would have loved to read more.
Prasad does not have a bottom line. I don't think I have complete conviction about one either except that for the United States would do more to prevent cryptocurrencies and other DeFi products from benefiting from regulatory and tax arbitrage and would do more for consumer protection. On a CBDC, I think the Fed can afford to move slowly and carefully, see what happens in other countries, but ultimately it should probably be more in the business of improving its wholesale backbone so that different digital retail solutions can be built on top of it.
Overall, very grateful for this careful, detailed, up to the minute book and the wide range of thinking and topics that went into it--mostly I just wanted a little more.
June 1, 2022
It’s good. You’re not gonna get a lot of hype and nonsense talk here. As far as Blockchain goes it’s actually pretty safe in a lot of the statements and proclamations it makes.
It’s a fairly even keeled look at cryptocurrency and the industry and the technology.
It’s a fairly even keeled look at cryptocurrency and the industry and the technology.
June 6, 2023
The author covers many different aspects of money, currency, cryptocurrency, and future trends such as the switch to a digital currency. I read this as a mom and coach to help my daughters prepare for a competition. Although some concepts like the blockchain were still difficult for a newbie to understand, Prasad included diagrams and everything needed to help grasp the concepts and catch me up to what’s going on in the crypto world.
March 4, 2022
As someone familiar with fintech topics but wanting a deeper review, I thought this was a good book
- It gives a nice review of players & trends in each problem area fintech is addressing
- It goes deep on history of cryptocurrencies and benefits of Central Bank digital currencies which I didn't know much about beforehand
- It gives a nice review of players & trends in each problem area fintech is addressing
- It goes deep on history of cryptocurrencies and benefits of Central Bank digital currencies which I didn't know much about beforehand
January 11, 2022
An economists textbook-like summary of the fintech,
cryptocurrencies, and central bank digital currency landscape from an orthodox economic point of view that is skeptical of cryptocurrencies.
If you aren’t familiar with these subjects then the book will give you an understanding of the subject, but as someone who studies these fields it wasn’t as worthwhile of a read. It did fill in some gaps with how various countries are approaching the space and their recent experimentations on digital money and views on cryptocurrency. It was only useful because I needed to understand the regulatory framework and recent central bank developments for a discussion I was hosting.
Overall it was well researched, covered how countries and high ranking officials at countries stand and was informative so I rounded it up to 3 stars.
cryptocurrencies, and central bank digital currency landscape from an orthodox economic point of view that is skeptical of cryptocurrencies.
If you aren’t familiar with these subjects then the book will give you an understanding of the subject, but as someone who studies these fields it wasn’t as worthwhile of a read. It did fill in some gaps with how various countries are approaching the space and their recent experimentations on digital money and views on cryptocurrency. It was only useful because I needed to understand the regulatory framework and recent central bank developments for a discussion I was hosting.
Overall it was well researched, covered how countries and high ranking officials at countries stand and was informative so I rounded it up to 3 stars.
June 7, 2022
A pragmatic, comprehensive look at the financial technologies that will keep changing the way we interact with money. Borders on skepticism but mostly backs it up with arguments. At times very technical but extremely interesting. The first 60% of the book is a solid 5 stars, after that the author starts rambling as if not knowing how to conclude. Still, I definitely recommend it to anyone working in the payments industry or someone who wants to better understand the social and technical complexities of financial technology.
April 16, 2022
The Future of Money covers a lot of ground in the fast-changing landscape of the global financial world. People who pick up a book of this kind are likely to be familiar with some of the concepts well. As a result, readers may find the discussions on those concepts not only familiar but also superficial. One may fear the same sort of simplistic treatment with the unfamiliar parts. While this must be true, it is also the best part of the book.
The book is a great place to be introduced to the changing parts of money and finance that one is not too familiar with. The author excels in explaining technologically and theoretically intricate concepts in simple terms. Many new-age businesses, products, processes, and solutions are easily and lucidly explained.
That the author is not a gung-ho revolutionary techno-enthusiasts also helps. The book balances the efficiency-generating aspects of new methods with the need for oversight, regulations, and structure in the systematically-critical banking industry. The author does a good job explaining technologies that increase efficiencies and improve the prospects of communities served versus those designed to skirt regulations, implicitly transferring risks to others through negative externalities. The author's experience and background play a role in the arguments asserting why most regulations exist for a reason, even when they exert a small toll on daily affairs and are used only on rare, rainy days.
The book is a great place to be introduced to the changing parts of money and finance that one is not too familiar with. The author excels in explaining technologically and theoretically intricate concepts in simple terms. Many new-age businesses, products, processes, and solutions are easily and lucidly explained.
That the author is not a gung-ho revolutionary techno-enthusiasts also helps. The book balances the efficiency-generating aspects of new methods with the need for oversight, regulations, and structure in the systematically-critical banking industry. The author does a good job explaining technologies that increase efficiencies and improve the prospects of communities served versus those designed to skirt regulations, implicitly transferring risks to others through negative externalities. The author's experience and background play a role in the arguments asserting why most regulations exist for a reason, even when they exert a small toll on daily affairs and are used only on rare, rainy days.
March 16, 2022
This book is the definition of too smart by half.
The author devotes a chapter early on to telling all of us why Bitcoin sucks and will never work - only to spend the rest of the book highlighting fledgling startups that *almost* solve problems that Bitcoin and the lightning network (never mentioned in the book - surprise surprise) have already solved.
The most blatant example of this is the author’s understanding of remittance issues. If only there was some decentralized global permissionless value transfer protocol that could send money across the world instantly and for free!
What makes this so egregious is the deep list of half baked tech startups that *could maybe solve this problem if xyzpdq* but there is NO mention of the lightning network or Strike - that have already rolled out solutions to this problem and are being used in real time.
This book is frustrating particularly because of the authors excellent understanding of the problem AND his insistence on things like “USD is a store of value” and “Bitcoin is bad for the environment” and “Bitcoin is a bad medium of exchange”.
It is hard to believe that this was laziness or he just forgot to mention these other arguments given the depth of the conversation in this book.
Overall, great introduction to the space, but reading just this without supplementing with the Bitcoin Standard or Layered Money or The Internet of Money would be doing yourself a disservice.
The author devotes a chapter early on to telling all of us why Bitcoin sucks and will never work - only to spend the rest of the book highlighting fledgling startups that *almost* solve problems that Bitcoin and the lightning network (never mentioned in the book - surprise surprise) have already solved.
The most blatant example of this is the author’s understanding of remittance issues. If only there was some decentralized global permissionless value transfer protocol that could send money across the world instantly and for free!
What makes this so egregious is the deep list of half baked tech startups that *could maybe solve this problem if xyzpdq* but there is NO mention of the lightning network or Strike - that have already rolled out solutions to this problem and are being used in real time.
This book is frustrating particularly because of the authors excellent understanding of the problem AND his insistence on things like “USD is a store of value” and “Bitcoin is bad for the environment” and “Bitcoin is a bad medium of exchange”.
It is hard to believe that this was laziness or he just forgot to mention these other arguments given the depth of the conversation in this book.
Overall, great introduction to the space, but reading just this without supplementing with the Bitcoin Standard or Layered Money or The Internet of Money would be doing yourself a disservice.
December 30, 2021
This is a recent well done book on recent innovations in the state of money and the digital revolution.with a special focus on bitcoin and related crypto-currencies. Much has been happening in this area and the immediate impacts are clear if one watches any business channel, which now covers bitcoin like it is a typical market venue. The material is detailed and complicated, but the author is an economist who does a fine job of explaining and updating. This is certainly not the last word on this, but it should bring a careful reader up to date. That is likely the best outcome for an area like this if one is not a direct player in the space.
I will add to this after some processing./
I will add to this after some processing./
June 4, 2023
A pretty good book, given the topic is quite prone to sensationalism and even outright fraud. From a very good explanation of money in itself, Prasad's work is very balanced and very nuanced across most.
An issue for me is how the first part of the book which explains money, doesn't seem to be as tied to the second part which explains digital money. For example, how commercial bank money creation would work in the context of a CBDC is something I'd have very much liked to see explored further. However, a great book that explored a volatile topic with great neutrality, so can't expect too much more just yet!
An issue for me is how the first part of the book which explains money, doesn't seem to be as tied to the second part which explains digital money. For example, how commercial bank money creation would work in the context of a CBDC is something I'd have very much liked to see explored further. However, a great book that explored a volatile topic with great neutrality, so can't expect too much more just yet!
January 21, 2022
The moment I could lay my hands on the book, instinctively I started looking for its title like a true seeker. I found it tucked away neatly in a corner along with the author’s name almost invisible. The name of the author is Easwar S Prasad in case you missed it. The cover is dominated by an image of an eerie looking creature from the netherworld. Normally a book on the subject of Economics is addressed to the nonexistent 'econs' as opposed to humans. But not this one. One of the most remarkable features of the book is the felicity with which the author has deployed the language to express his thoughts. Written in a lucid writing style this book even on an abstract subject like Economics is eminently readable. The title of the book “The Future of Money” is a poser and a rhetoric at the same time. Between the covers the author extensively covers the subject of money – past, present and future. Even when you meet an economist casually the first clichéd expression that you would hear from him is ‘money is what money does.’ This book, on the other hand, is about what we are doing to money. You are given a neat education on the different avatars that money had taken so far from cowrie shells to crypto coins. Make no mistake; this book is book on finance in general and not just about money.
The motivation to write this tome must have been the appearance (metaphorically) of digital currencies that has come to dominate conversations everywhere around the globe. Throughout the book the author does not lose sight of the primary functions of money and how the new and evolving forms of currencies hold up to them. Money serves three basic functions - a unit of account, a medium of exchange and a store of value. Throughout the book the author measures the digital form of money against these basic functions. The author also has taken pains to extensively deal with the technologies associated with Bitcoins, Distributed Ledger Technology, Blockchain and the nuances associated with the terminologies like proof of work, proof of stake, et al. However, he has kept his focus of the discussion on the intersection between technology and the functions of money. A reader is not expected to become an expert on the technologies that drive the crypto phenomenon by just reading the book; but he is sure to get a reasonably good idea about what you can expect when an abstract science like economics meets a futuristic technology like blockchain. The book deals with a whole host of associated issues like what happens to the much-needed trust factor associated with money and the fears associated with the crypto currencies. He makes a convincing case for Central Bank Digital Currency (CBDC). This proposition is coming at a time when many a Central Bank around the world are toying with the idea of coming out with their own CBDCs. The chapters on these subjects make for compelling reading, especially since these deal with crypto coins and tokens and the experiences of several economies around the world, both developed and emerging.
The book has an entire chapter devoted to the role of Central Banks and in their ability to enforce monetary policies with the advent of cryptocurrencies. The author is also emphatic when it comes to the apex bank’s mandate to target inflation even at the cost of growth at a time many question this very proposition all across the world. He admits without conceding (an economist’s way of speaking) that the Central Bank’s preeminence would be vastly diminished with the advent of digital currencies. That is not just a sobering thought but a dangerous place to be in for all of us. The author articulates the fear that many of us also privately entertain on what the evolving technology in the Fintech field could do to a nation’s economy.
True to the typical prevarications of an economist the author concludes the book with a chapter more in the nature of a summary of what he intends to convey through the book or perhaps as an afterthought just in case he had forgotten to flag any of the issues that he wanted to. In the process and also elsewhere in the book there is a tendency on the part of the author to repeat himself. In one place the author also makes a confession of sorts as an economist, albeit in jest, when he admits that if a definite answer for a question is sought from an economist what you get is this famous two bit – “it depends”. In a similar vein he closes the book being tentatively certain (oxymoron) about the future. This drift in the narrative can be seen elsewhere too when he says “technology makes regulation easier …. and harder”!
“The Future of Money” has not come out one day too soon when the whole financial world around the globe is beginning to resemble a large casino thanks to a crypto mania. The book may not give you precise answers to your misgivings about the world of crypto, but it is sure to warn you of what lie ahead beyond your comprehension. My verdict: You don't have to be an economist to appreciate this book.
The motivation to write this tome must have been the appearance (metaphorically) of digital currencies that has come to dominate conversations everywhere around the globe. Throughout the book the author does not lose sight of the primary functions of money and how the new and evolving forms of currencies hold up to them. Money serves three basic functions - a unit of account, a medium of exchange and a store of value. Throughout the book the author measures the digital form of money against these basic functions. The author also has taken pains to extensively deal with the technologies associated with Bitcoins, Distributed Ledger Technology, Blockchain and the nuances associated with the terminologies like proof of work, proof of stake, et al. However, he has kept his focus of the discussion on the intersection between technology and the functions of money. A reader is not expected to become an expert on the technologies that drive the crypto phenomenon by just reading the book; but he is sure to get a reasonably good idea about what you can expect when an abstract science like economics meets a futuristic technology like blockchain. The book deals with a whole host of associated issues like what happens to the much-needed trust factor associated with money and the fears associated with the crypto currencies. He makes a convincing case for Central Bank Digital Currency (CBDC). This proposition is coming at a time when many a Central Bank around the world are toying with the idea of coming out with their own CBDCs. The chapters on these subjects make for compelling reading, especially since these deal with crypto coins and tokens and the experiences of several economies around the world, both developed and emerging.
The book has an entire chapter devoted to the role of Central Banks and in their ability to enforce monetary policies with the advent of cryptocurrencies. The author is also emphatic when it comes to the apex bank’s mandate to target inflation even at the cost of growth at a time many question this very proposition all across the world. He admits without conceding (an economist’s way of speaking) that the Central Bank’s preeminence would be vastly diminished with the advent of digital currencies. That is not just a sobering thought but a dangerous place to be in for all of us. The author articulates the fear that many of us also privately entertain on what the evolving technology in the Fintech field could do to a nation’s economy.
True to the typical prevarications of an economist the author concludes the book with a chapter more in the nature of a summary of what he intends to convey through the book or perhaps as an afterthought just in case he had forgotten to flag any of the issues that he wanted to. In the process and also elsewhere in the book there is a tendency on the part of the author to repeat himself. In one place the author also makes a confession of sorts as an economist, albeit in jest, when he admits that if a definite answer for a question is sought from an economist what you get is this famous two bit – “it depends”. In a similar vein he closes the book being tentatively certain (oxymoron) about the future. This drift in the narrative can be seen elsewhere too when he says “technology makes regulation easier …. and harder”!
“The Future of Money” has not come out one day too soon when the whole financial world around the globe is beginning to resemble a large casino thanks to a crypto mania. The book may not give you precise answers to your misgivings about the world of crypto, but it is sure to warn you of what lie ahead beyond your comprehension. My verdict: You don't have to be an economist to appreciate this book.
December 25, 2023
A sensible book on CBDCs and Cryptos. Would recommend. 4 stars.
February 17, 2022
The author makes a level-headed and clear analysis of what changes to expect in the near-future as regards financial transactions with the arrival of digital currency, and how that will impact on issues dealing with inflation and the tools that central banks have to deal with the stability of the economic system.
He gives clear discussions about current payment and value exchange mechanisms, be it in local markets or in cross-border markets.
He goes into some depth on the workings of Bitcoin and other coins using blockchain technology (it was probably the best explanation I read about it so far) and goes on about their strong and weak features, peppering the text with some real world cases to drive his points home.
This was a very nice read, and I recommend this book whole-heartedly to anyone interested in economy and finance.
He gives clear discussions about current payment and value exchange mechanisms, be it in local markets or in cross-border markets.
He goes into some depth on the workings of Bitcoin and other coins using blockchain technology (it was probably the best explanation I read about it so far) and goes on about their strong and weak features, peppering the text with some real world cases to drive his points home.
This was a very nice read, and I recommend this book whole-heartedly to anyone interested in economy and finance.
November 19, 2021
Clear, informative presentation, focusing on cryptocurrency and fintech, what they are and their pros and cons. With good general description of financial system background. The key macro thought in the book appears at the very end:
“Potentially big changes to societal structures are also in prospect. The displacement of cash by digital payments systems will eliminate any vestige of privacy in commercial transactions. Bitcoin and other cryptocurrencies were intended to secure pseudonymity and eliminate reliance on governments and major financial institutions in the conduct of commerce.They might, instead, spur changes that end up compromising privacy and further strengthening the power of governments. Societies will struggle to check th empower of governments as individual liberties face even greater perils.” P. 360.
Technology enables governments to mentally and physically enslave their citizens. Crypto and fintech fit right into that horrible paradigm. We see that dramatically in China and increasingly in America.
“Potentially big changes to societal structures are also in prospect. The displacement of cash by digital payments systems will eliminate any vestige of privacy in commercial transactions. Bitcoin and other cryptocurrencies were intended to secure pseudonymity and eliminate reliance on governments and major financial institutions in the conduct of commerce.They might, instead, spur changes that end up compromising privacy and further strengthening the power of governments. Societies will struggle to check th empower of governments as individual liberties face even greater perils.” P. 360.
Technology enables governments to mentally and physically enslave their citizens. Crypto and fintech fit right into that horrible paradigm. We see that dramatically in China and increasingly in America.
April 27, 2024
Good book. just good idk what else to say. chapters on cryptocurrencies were very nice i didnt know shit so that was cool. also i feel like i learned A LOT on everything related to digitalisation of money thanks to this book. im sure theres much more to be learned but this surely was a nice introduction. very curious to see where everyhing will go in the future. especially considering the rapid changes of recent years. either way, this book was GOOD. no 5 stars cause macroeconomic policy simply doesnt interest me that much and the book itself didnt leave an imprint on me personally. does not take away that its a 5/5 book in terms of content and writing.
April 6, 2022
Wow! An essential read for those wanting to clarity about the function of money and banking. We truly need to understand the basic foundation on what these are before we can explore next on the future of where physical money and currency is heading. In the simplest of way, money create as a form of exchange when barter trade was not possible, that was where coins were created. Later banks were created, and notes (as a lighter alternative) and soon, different facilities as well as products offered.
One portion to take serious note was the initial creator of e-currency; not the banks, financial institutes but tech programmers and later leverage by tech companies. We know of ANT Group and Facebook, attempt and almost succeeding in creating their own financial system, even gaining support from several large partners before the brakes were pulled, as governments felt there was no control, regulation and will bring disruption to the existing system. Not all disruption is good, like how tech sector like to believe. However, in this case, it is to find the blending (if it's possible at all). Regulations on crypto have stepped up more recently, with some countries put an outright ban in trade and or mining. And in some cases, now taxation on capital gain is placed.
The future of money will be surely be less physical and more in the digital forms. The roles of banks will then change too. And as currency switches more to the digital form, several smaller currency will soon be replaced. Right now, there are more variations of coins than currency, with the main ones being BTC and ETH (history repeats in the form of USD and EURO), only difference (as what I understand), e-coins have a production limit, hence unlike current, banks cant print more to use more. Will this be a control towards inflation? Or creating a greater gap of the haves and haves not? Time will tell.
There is so much to unpack from this book, many thoughts, many paths to follow, and I only highlighted above my immediate thoughts. Nevertheless, I understand that currency as I know it, is changing.
One portion to take serious note was the initial creator of e-currency; not the banks, financial institutes but tech programmers and later leverage by tech companies. We know of ANT Group and Facebook, attempt and almost succeeding in creating their own financial system, even gaining support from several large partners before the brakes were pulled, as governments felt there was no control, regulation and will bring disruption to the existing system. Not all disruption is good, like how tech sector like to believe. However, in this case, it is to find the blending (if it's possible at all). Regulations on crypto have stepped up more recently, with some countries put an outright ban in trade and or mining. And in some cases, now taxation on capital gain is placed.
The future of money will be surely be less physical and more in the digital forms. The roles of banks will then change too. And as currency switches more to the digital form, several smaller currency will soon be replaced. Right now, there are more variations of coins than currency, with the main ones being BTC and ETH (history repeats in the form of USD and EURO), only difference (as what I understand), e-coins have a production limit, hence unlike current, banks cant print more to use more. Will this be a control towards inflation? Or creating a greater gap of the haves and haves not? Time will tell.
There is so much to unpack from this book, many thoughts, many paths to follow, and I only highlighted above my immediate thoughts. Nevertheless, I understand that currency as I know it, is changing.
November 28, 2021
A new technology viewed through an outdated lens.
Disclaimer: I work in the industry of cryptocurrencies
If you don’t know much of cryptocurrencies and are usually weary of innovations, this book is for you.
Prasad looks at cryptocurrencies from a central bank’s perspective and clearly dismisses the potential of decentralised cryptocurrencies. As a true academic, he makes sure to leave the door open to any possibility and refrains from taking a clear stance regarding most key topics.
I was hoping for a refreshing and clear view of how decentralised cryptocurrencies will change our world. What I found instead is a description of how central banks will become more digitalised, how they’ll leave the door open for a few tech giants to release their own coin, while keeping our failing financial system the same.
Disclaimer: I work in the industry of cryptocurrencies
If you don’t know much of cryptocurrencies and are usually weary of innovations, this book is for you.
Prasad looks at cryptocurrencies from a central bank’s perspective and clearly dismisses the potential of decentralised cryptocurrencies. As a true academic, he makes sure to leave the door open to any possibility and refrains from taking a clear stance regarding most key topics.
I was hoping for a refreshing and clear view of how decentralised cryptocurrencies will change our world. What I found instead is a description of how central banks will become more digitalised, how they’ll leave the door open for a few tech giants to release their own coin, while keeping our failing financial system the same.
February 1, 2023
This book is a thorough overview of some of the most important and interesting aspects of the debates around Fintech, cryptocurrencies, to a limited extent DeFi, but most importantly, around Central Bank Digital Currencies (CBDC). It is rather a textbook-ish type of book, listing pros and cons, benefits and limits, and with the exception of the chapter on Bitcoin, almost purely from a perspective of an academic economist.
For the most part, Prasad is realistically optimistic about the prospects of fintech and the impact of CBDCs. He sees the potential benefits of fintech and CBDCs in financial inclusion, augmentation of some of the tools at the central bank's disposal (like the potential to eliminate the zero lower bound problems), the elimination of friction in currency exchanges or increases in security and potential lowering of corruption. On the topic of cash, he is cautiously on the side of slow extinction in developed economies, while repeatedly mentioning its benefits (like privacy or stability).
While the chapter on bitcoin is extremely detailed, going all the way to explaining the algorithms behind the creation of individual blocks in the blockchain and the structure that creates its immutability, the policy-oriented chapters and debates around the implementation of CBDCs are shallow in the analysis. There is a lot of discussion about individual countries and their attempts on CBDCs (like Uruguay, Venezuela, Bahamas or the Marshall Islands) and while some are interesting, most do not go deeply enough to actually understand the implementation beyond what the academic economic theory would model to be or to happen. This is for instance visible in the debates of Russian attempts to create a digital currency to counterbalance the impact of American and dollar-based sanctions, which spends a good number of pages discussing its potential and function in relation to the rise of yuan etc while finishing with a paragraph that it would be impossible to evade the problem of the need of final convertibility to a fiat currency.
I am frankly a bit surprised by the generally positive reviews of this book, as I was a bit disappointed. Not that it would be in some way bad - it is rather a good overview, but more in the sense of a textbook, than a book written with an argument. I got a better understanding of the concepts it debates, but not so much about how they fit together and on a number of topics, it is generally just a general theoretical perspective on what it could mean, not how it would actually work.
Furthermore, as someone with experience from the national government and central bank, some discussions, like some of those about account-based CBDCs, sound like academic discussions without considerations from the technical implementation standpoint. Building national digital systems to accomplish, for instance, the type of financial inclusion the author envisions, would be immensely difficult and, to borrow a phrase, corruption would be priced-in for a significant number of smaller countries and currencies. Similarly, the author praises India's public infrastructure for payment services, but we do not hear about how it actually made it work, the basics of its functioning or how can other countries actually learn from it.
There are some really interesting points, however. I was fascinated to learn about Special Drawing Rights, an IMF unit of account, that is neither money nor credit, yet can serve as a method of exchange for foreign currencies by individual countries. It is not close enough to Keynes' Bancor to serve as a supranational currency but still can provide currency liquidity in times of distress for smaller countries. However, this kind of debate on the future nature of money is lost amid the quite repetitive and, to be fair, not too detailed analysis of the implications of CBDCs for the future of monetary policy and financial systems.
On the other hand, the book is and will be for the future limited by the fact that it came out in mid-2021, before the end of the zero-interest rate world, before the collapse of Luna, Three Arrows Capital, FTX and others that got swept out in the aftermath of the seismic shift in the functioning of the global financial system. It does not anticipate it (and does not even thoroughly debate the functioning of the algorithm-based stablecoins), as it does not discuss the nature and functioning of crypto exchanges. In that sense, it feels a bit like the pre-modern history of the crypto world.
Overall, if you are looking for a good overview of the basics and backgrounds of fintech and crypto and do not mind long theoretical discussions and lists, this is a useful book to pick up.
For the most part, Prasad is realistically optimistic about the prospects of fintech and the impact of CBDCs. He sees the potential benefits of fintech and CBDCs in financial inclusion, augmentation of some of the tools at the central bank's disposal (like the potential to eliminate the zero lower bound problems), the elimination of friction in currency exchanges or increases in security and potential lowering of corruption. On the topic of cash, he is cautiously on the side of slow extinction in developed economies, while repeatedly mentioning its benefits (like privacy or stability).
While the chapter on bitcoin is extremely detailed, going all the way to explaining the algorithms behind the creation of individual blocks in the blockchain and the structure that creates its immutability, the policy-oriented chapters and debates around the implementation of CBDCs are shallow in the analysis. There is a lot of discussion about individual countries and their attempts on CBDCs (like Uruguay, Venezuela, Bahamas or the Marshall Islands) and while some are interesting, most do not go deeply enough to actually understand the implementation beyond what the academic economic theory would model to be or to happen. This is for instance visible in the debates of Russian attempts to create a digital currency to counterbalance the impact of American and dollar-based sanctions, which spends a good number of pages discussing its potential and function in relation to the rise of yuan etc while finishing with a paragraph that it would be impossible to evade the problem of the need of final convertibility to a fiat currency.
I am frankly a bit surprised by the generally positive reviews of this book, as I was a bit disappointed. Not that it would be in some way bad - it is rather a good overview, but more in the sense of a textbook, than a book written with an argument. I got a better understanding of the concepts it debates, but not so much about how they fit together and on a number of topics, it is generally just a general theoretical perspective on what it could mean, not how it would actually work.
Furthermore, as someone with experience from the national government and central bank, some discussions, like some of those about account-based CBDCs, sound like academic discussions without considerations from the technical implementation standpoint. Building national digital systems to accomplish, for instance, the type of financial inclusion the author envisions, would be immensely difficult and, to borrow a phrase, corruption would be priced-in for a significant number of smaller countries and currencies. Similarly, the author praises India's public infrastructure for payment services, but we do not hear about how it actually made it work, the basics of its functioning or how can other countries actually learn from it.
There are some really interesting points, however. I was fascinated to learn about Special Drawing Rights, an IMF unit of account, that is neither money nor credit, yet can serve as a method of exchange for foreign currencies by individual countries. It is not close enough to Keynes' Bancor to serve as a supranational currency but still can provide currency liquidity in times of distress for smaller countries. However, this kind of debate on the future nature of money is lost amid the quite repetitive and, to be fair, not too detailed analysis of the implications of CBDCs for the future of monetary policy and financial systems.
On the other hand, the book is and will be for the future limited by the fact that it came out in mid-2021, before the end of the zero-interest rate world, before the collapse of Luna, Three Arrows Capital, FTX and others that got swept out in the aftermath of the seismic shift in the functioning of the global financial system. It does not anticipate it (and does not even thoroughly debate the functioning of the algorithm-based stablecoins), as it does not discuss the nature and functioning of crypto exchanges. In that sense, it feels a bit like the pre-modern history of the crypto world.
Overall, if you are looking for a good overview of the basics and backgrounds of fintech and crypto and do not mind long theoretical discussions and lists, this is a useful book to pick up.
February 24, 2023
Read Chapter 4 for a Solid Introduction to Bitcoin's Upsides and Downsides!
I picked up this book on the recommendation of an economics professor, after I asked her for resources to help me understand Bitcoin. Though I only read Chapters 4 (which is all about Bitcoin) and 10 (the conclusion) [I wasn't interested in reading the rest of this meaty treatise on digital currency], the book did fit the bill! I can honestly say that the words "blockchain", "Bitcoin mining", "hashing", etc. all mean something to me now! Here's a few bottom lines that I found particularly interesting:
From Chapter 4:
*Bitcoin isn't a great currency, in that it doesn't hold value really well and thus makes a crummy medium of exchange. It's much better understood as a speculative asset, like a stock that you hope to "buy low and sell high." And, given the almost religious fervor that its devotees have, Bitcoin isn't going anywhere.
*Bitcoin's major innovation is its blockchain technology, in which a new set of Bitcoin transactions are validated through brute-force computing puzzles every ten minutes (i.e., Bitcoin mining through "proof of work", and the puzzles get harder or easier depending on the number of hopeful miners out there; also, successful miners are rewarded with new Bitcoin, which is how the currency is generated!) and that set of validated transactions are then tacked on to the public-facing record of all previously-validated transactions. It's nearly impossible for hackers to go back and input diversions in Bitcoin's transaction history, allowing for double-spending or invalidating previous transactions.
*Bitcoin mining has a SUPER high energy cost and is super inefficient; as Prasad says, "vast amounts of computing power and energy are devoted simultaneously to solving the same problem, and the solutions to those problems offer no material benefit to humanity." "In 2018, Bitcoin mining accounted for about 1 percent of world energy consumption. ... The Bitcoin network has a carbon footprint similar to that of New Zealand, an energy consumption total similar to that of Chile, and an electronic waste generation level comparable to that of Luxembourg." (Also note that about 2/3 of all Bitcoin mining takes place in the PRC.)
*Due to its decentralized nature and security measures, Bitcoin offers no backups or reversal mechanisms to account for human error. If you accidentally send Bitcoin to an unintended user, there's no mechanism to get it back. Even worse, if you forget the passcode associated with a particular Bitcoin (or if you die), that Bitcoin is simply irretrievable moving forward. "One research firm estimated that as of early 2018 somewhere between $90 billion and $145 billion in Bitcoins were 'lost' forever."
*Less and less Bitcoin are being used for illegal/terrorist activities, ever since it's become apparent that Bitcoin transactions aren't actually anonymous.
From Chapter 10:
*The rise of private cryptocurrencies, in some ways, brings us back to a feudal/Wild West era: "As recently as a century ago, private currencies competed against each other and with government-issued currencies." This isn't unprecedented--reminds me of mining towns that paid their workers with "company dollars" that could only be used at the "company store."
*An interesting note on cash: "It is paradoxical that an instrument provided by an official institution has been used extensively to circumvent government oversight and regulations. With the use of cash for legitimate commercial transactions falling rapidly in many economies, cash could become more critical instead for financing a range of illicit activities, including corruption, tax evasion, and money laundering. This foregrounds the question of whether there is an imperative for an official agency, such as a central bank, to provide an anonymous method of transacting that benefits unlawful activities as much or more as it does lawful ones." Something to think about!
*Moving forward, "the only cryptocurrencies that are likely to have stable value, allowing them to function as reliable mediums of exchange, are those that--ironically enough--are backed by reserves of fiat currencies."
I wasn't interested in reading the rest (neither finance nor tech are really my thing), but I definitely found the parts I read interesting and informative--nice to finally know a little bit about Bitcoin!
I picked up this book on the recommendation of an economics professor, after I asked her for resources to help me understand Bitcoin. Though I only read Chapters 4 (which is all about Bitcoin) and 10 (the conclusion) [I wasn't interested in reading the rest of this meaty treatise on digital currency], the book did fit the bill! I can honestly say that the words "blockchain", "Bitcoin mining", "hashing", etc. all mean something to me now! Here's a few bottom lines that I found particularly interesting:
From Chapter 4:
*Bitcoin isn't a great currency, in that it doesn't hold value really well and thus makes a crummy medium of exchange. It's much better understood as a speculative asset, like a stock that you hope to "buy low and sell high." And, given the almost religious fervor that its devotees have, Bitcoin isn't going anywhere.
*Bitcoin's major innovation is its blockchain technology, in which a new set of Bitcoin transactions are validated through brute-force computing puzzles every ten minutes (i.e., Bitcoin mining through "proof of work", and the puzzles get harder or easier depending on the number of hopeful miners out there; also, successful miners are rewarded with new Bitcoin, which is how the currency is generated!) and that set of validated transactions are then tacked on to the public-facing record of all previously-validated transactions. It's nearly impossible for hackers to go back and input diversions in Bitcoin's transaction history, allowing for double-spending or invalidating previous transactions.
*Bitcoin mining has a SUPER high energy cost and is super inefficient; as Prasad says, "vast amounts of computing power and energy are devoted simultaneously to solving the same problem, and the solutions to those problems offer no material benefit to humanity." "In 2018, Bitcoin mining accounted for about 1 percent of world energy consumption. ... The Bitcoin network has a carbon footprint similar to that of New Zealand, an energy consumption total similar to that of Chile, and an electronic waste generation level comparable to that of Luxembourg." (Also note that about 2/3 of all Bitcoin mining takes place in the PRC.)
*Due to its decentralized nature and security measures, Bitcoin offers no backups or reversal mechanisms to account for human error. If you accidentally send Bitcoin to an unintended user, there's no mechanism to get it back. Even worse, if you forget the passcode associated with a particular Bitcoin (or if you die), that Bitcoin is simply irretrievable moving forward. "One research firm estimated that as of early 2018 somewhere between $90 billion and $145 billion in Bitcoins were 'lost' forever."
*Less and less Bitcoin are being used for illegal/terrorist activities, ever since it's become apparent that Bitcoin transactions aren't actually anonymous.
From Chapter 10:
*The rise of private cryptocurrencies, in some ways, brings us back to a feudal/Wild West era: "As recently as a century ago, private currencies competed against each other and with government-issued currencies." This isn't unprecedented--reminds me of mining towns that paid their workers with "company dollars" that could only be used at the "company store."
*An interesting note on cash: "It is paradoxical that an instrument provided by an official institution has been used extensively to circumvent government oversight and regulations. With the use of cash for legitimate commercial transactions falling rapidly in many economies, cash could become more critical instead for financing a range of illicit activities, including corruption, tax evasion, and money laundering. This foregrounds the question of whether there is an imperative for an official agency, such as a central bank, to provide an anonymous method of transacting that benefits unlawful activities as much or more as it does lawful ones." Something to think about!
*Moving forward, "the only cryptocurrencies that are likely to have stable value, allowing them to function as reliable mediums of exchange, are those that--ironically enough--are backed by reserves of fiat currencies."
I wasn't interested in reading the rest (neither finance nor tech are really my thing), but I definitely found the parts I read interesting and informative--nice to finally know a little bit about Bitcoin!
May 12, 2022
Worth the read. I was curious how Financial Technology would impact banks in terms of investing in bank stocks. This is a good primer on the forces at play with private (Bitcoin) and central bank fiat currencies. It is also a great primer on the differences in cryptocurrency technologies. It does, however, neglect some sizable elephants in the room. One premise is that Central Bank Digital Currencies (CBRD) are inevitable and on their way, with Central Banks of advanced economies having an advantage but a bureaucratic timidity and reluctance to embrace CBRD. CBRD would mean more government surveillance of our every transaction, but it would limit innovation in FinTech. The Fed is currently lobbying to capture all transactions below $600 in its data sweep. Recent aggressive sanctions against Russia will no doubt accelerate efforts of other countries to abandon the US Dollar for resolving cross border transactions. However, the author fails to mention the big reason why the US Dollar dominates: more than 200 years of peaceful transfer of power. He does cite rule of law and evidence of the Fed’s will to manage inflation. However, we have not actively executed several million of our citizens (Russian Revolution and Chinese Cultural Revolution) and, for the most part, the US Govt has not made it a practice to confiscate wealth from its citizens. No German citizen could reap the rewards of a 30 yr bond: WWII, East Germany, European Union – different currencies, different laws, different governments. Another neglected premise, if economies like Sweden become cashless, Latin American economies where cash is still king will become a refuge for illicit transactions beyond the surveillance of governments, maybe even the hiding of savings as well. Interesting that a major reason Netherlands became a global center of commerce was because they had several mints that were private – they competed to provide quality and reliable coinage, facilitating international commerce. As each Government, including the US, continues to tax its citizens by printing money, the refuge of private currencies despite their volatility might become too tempting for those desperately trying to preserve the value of their savings. I’m not so sure investing in bank stocks is a good idea at this point – too many variables at play. The author does not discuss El Salvador and it's efforts to adopt Bitcoin. He does discuss Venezuela, Uruguay, Sweden and China in sufficiently informative and interesting detail. Anyone concerned and curious about the future of their wealth should read this book and get ready for a crazy ride.
June 14, 2022
This is one of the best books I've read on the different aspects of digital currencies and their (potential) impact on the real world economy. The book provides a structural overview of every aspect of monetary policy in so far as it relates to money and then proceeds to explain how these different aspects could be impacted.
The book starts with a basic explanation of how money and finance (and thus banks) are all connected and how their interaction impacts how we use money and how we value money. It then looks at innovations provided by fintechs and crypto currencies and how these can influence (or complicate) these interactions. The author provides a variety of interesting examples and how money is increasingly used in alternative ways.
The author then gets to the meat of the book, which is if / why Central Banks might want to get involved in digital currencies and how this might happen. A lot of background is provided on the policies involved, the advantages (e.g. in case of a government subsidy money can be immediately deposited) and disadvantages (possible bank runs), and technology. Several examples are provided of pilots that are currently ongoing or that have been finished already and some of the front runners (Sweden and China, Singapore and Canada, and several other smaller countries) are discussed and the varying degrees of success or failure they have experienced with their experiments.
The author concludes that cash money will continue to exist and that Central Bank Digital Currencies will provide a valuable additional tool for Central Banks that will help them in their mission to create a stable currency (crypto currencies have not been able to do that and are also unsuitable due to the way they are set up, whether it is "gas fees" or limitation on the number of coins that can be minted).
All in all this was one of the most interesting and well researched books I have read on the topic of digital currencies. Where the vast majority of books fall somewhere in the category of being vaguely descriptive to sheerly theoretical (neither of which is satisfying for someone actually trying to understand something about digital currencies) this is a valuable and important book. Very much worth a read.
The book starts with a basic explanation of how money and finance (and thus banks) are all connected and how their interaction impacts how we use money and how we value money. It then looks at innovations provided by fintechs and crypto currencies and how these can influence (or complicate) these interactions. The author provides a variety of interesting examples and how money is increasingly used in alternative ways.
The author then gets to the meat of the book, which is if / why Central Banks might want to get involved in digital currencies and how this might happen. A lot of background is provided on the policies involved, the advantages (e.g. in case of a government subsidy money can be immediately deposited) and disadvantages (possible bank runs), and technology. Several examples are provided of pilots that are currently ongoing or that have been finished already and some of the front runners (Sweden and China, Singapore and Canada, and several other smaller countries) are discussed and the varying degrees of success or failure they have experienced with their experiments.
The author concludes that cash money will continue to exist and that Central Bank Digital Currencies will provide a valuable additional tool for Central Banks that will help them in their mission to create a stable currency (crypto currencies have not been able to do that and are also unsuitable due to the way they are set up, whether it is "gas fees" or limitation on the number of coins that can be minted).
All in all this was one of the most interesting and well researched books I have read on the topic of digital currencies. Where the vast majority of books fall somewhere in the category of being vaguely descriptive to sheerly theoretical (neither of which is satisfying for someone actually trying to understand something about digital currencies) this is a valuable and important book. Very much worth a read.
December 19, 2022
Chapter-1 starts with an interesting quote of "Roberto Calasso", The Celestial Hunter
"A book is written when there is something specific that has to be discovered. The writer doesn't know what it is, nor where it is, but knows it has to be found. The hunt then begins. The writing begins."
I feel that the author has taken some part of this quote too seriously and started writing this book with no exact plan on where he wants to take the reader. Generally when a book comes from an author of this credential, people expect some perspective and critical thinking on subject(in this case the future of money), the books starts by setting the stage by putting 10000 feet view of money and finance which really serves no purpose as the reader who is interested in knowing about future of money already knows about the current state of finance and its eco system. Rest of the book is written to fill the content, equity, bond market, investment banking, credit, insurance and what not. I pushed myself hard to go page by page and finally gave up.
I am actually amazed, how this book has managed to secure some good words from all the BIG folks in the field of finance such as Dr. RaghuRam Rajan the former governor of the Reserve Bank of India.
Crypto currency is the only chapter that has some meat else there is almost nothing that I liked about this book. Book binding and paper quality is excellent. When it comes to content this is more fluff with absolutely no stuff. There is no perspective from the author on any of the topic, it is simply aggregation of some commonly and easily found content on the internet packaged in a book format.
Initially I wanted to rate this book with 2 star, unfortunately I couldn't convince myself for the simple fact that this book contains ridiculously high 100 pages of references and indexes, i.e. about 25% of the overall book, this simply is to make the book look filled with more content and in reality that book has redundant commentary of 350 pages.
1 STAR for Book binding and paper quality, with respect to content - PLS DONT BUY, NOT RECOMMENDED!
"A book is written when there is something specific that has to be discovered. The writer doesn't know what it is, nor where it is, but knows it has to be found. The hunt then begins. The writing begins."
I feel that the author has taken some part of this quote too seriously and started writing this book with no exact plan on where he wants to take the reader. Generally when a book comes from an author of this credential, people expect some perspective and critical thinking on subject(in this case the future of money), the books starts by setting the stage by putting 10000 feet view of money and finance which really serves no purpose as the reader who is interested in knowing about future of money already knows about the current state of finance and its eco system. Rest of the book is written to fill the content, equity, bond market, investment banking, credit, insurance and what not. I pushed myself hard to go page by page and finally gave up.
I am actually amazed, how this book has managed to secure some good words from all the BIG folks in the field of finance such as Dr. RaghuRam Rajan the former governor of the Reserve Bank of India.
Crypto currency is the only chapter that has some meat else there is almost nothing that I liked about this book. Book binding and paper quality is excellent. When it comes to content this is more fluff with absolutely no stuff. There is no perspective from the author on any of the topic, it is simply aggregation of some commonly and easily found content on the internet packaged in a book format.
Initially I wanted to rate this book with 2 star, unfortunately I couldn't convince myself for the simple fact that this book contains ridiculously high 100 pages of references and indexes, i.e. about 25% of the overall book, this simply is to make the book look filled with more content and in reality that book has redundant commentary of 350 pages.
1 STAR for Book binding and paper quality, with respect to content - PLS DONT BUY, NOT RECOMMENDED!
April 6, 2022
This book examines the impact of cryptocurrencies and digital innovations in financial technologies on the future of currency. Prasad explains the technologies that enable cryptocurrencies, and goes on to explain how these technologies can be used to overcome the weaknesses in existing cryptocurrencies. He looks at hashing, Merkle trees, distributed ledger technologies, and clearly explains how they all interact to create Bitcoin - which he follows with a serious examination of Bitcoin's failings, in economic terms (e.g., it does not act as a currency but a speculative asset) and in its environmental impact.
The second half of the book examines central bank digital currency (CBDC), and makes a case for why central bankers should issue them. Prasad keys in on two main benefits for this technology, improved distribution ('helicopter drops,' as he calls them), and allowing central bankers to set negative interest rates without cash serving as a zero-rate backstop to escape this policy. He details the shortcomings of current currency technology on stimulus payments' actually getting to people, but he repeatedly comes back to how setting negative rates could help economies.
If anything, Prasad seems more intent on shilling for negative rates during a contraction than he is about explaining CBDCs themselves (this is my biggest criticism). Apparently, it's the job of the whole society to overcome recessions by borrowing and spending rather than the government pursuing Keynesian policies...you'll also become highly aware of Prasad's Chicago-school views, but it's easy enough to ignore those and focus on the FinTech insights and get the insights you were looking for.
The second half of the book examines central bank digital currency (CBDC), and makes a case for why central bankers should issue them. Prasad keys in on two main benefits for this technology, improved distribution ('helicopter drops,' as he calls them), and allowing central bankers to set negative interest rates without cash serving as a zero-rate backstop to escape this policy. He details the shortcomings of current currency technology on stimulus payments' actually getting to people, but he repeatedly comes back to how setting negative rates could help economies.
If anything, Prasad seems more intent on shilling for negative rates during a contraction than he is about explaining CBDCs themselves (this is my biggest criticism). Apparently, it's the job of the whole society to overcome recessions by borrowing and spending rather than the government pursuing Keynesian policies...you'll also become highly aware of Prasad's Chicago-school views, but it's easy enough to ignore those and focus on the FinTech insights and get the insights you were looking for.
December 20, 2021
In this book, Prasad shows the potential of digital innovations to democratize the access to finance and reduce inefficiencies. The book is relevant both for economists as well as for laymen, and provides several examples of innovations, updated as of ~May 2021.
Prasad explains the underpinnings of Bitcoin and Blockchain and how they elegantly get away with the need for trust in digital transactions. However, the author dismisses the (initial) claim that cryptocurrencies would provide anonymity in transactions, and that “scarcity creates value”. The environmental footprint is also worrisome.
Due to unbacked currencies’ inherent volatility, the authors believe that “stablecoins”, such as CBDCs backed by fiat reserve currencies’ central banks (Fed, ECB, BoJ) or by large companies (e.g. Facebook’s Diem) have the most potential to become a widespread medium of exchange and store of value. CBDCs can be either account-based (individuals have accounts in CBs) or value-based (people have accounts in FIs, CB manages payment system).
The book is rich in examples. The author shows how financial innovation may provide solutions for financial inclusion and reduced money laundering (e.g. Uruguayan e-peso, Swedish e-krona); retail and wholesale CBDCs; international money transfers (Ripple), to substitute the old SWIFT system; credit access (LendingClub); insurance. With no powerful incumbent banks, EMEs could leapfrog when adopting innovations.
At the same time, Prasad is, throughout the whole book, cautious in his optimism. Due to the emergence of sophisticated financial products, the regulation work done by monetary authorities becomes way more intricate, which could easily spill out to the rest of the financial sector. Bank runs, confidence crises, gambling nature, and hacking pose new risks to the financial system. More volatile capital flows, and widespread adoption of foreign CBDCs, become a new danger for EMEs. Cryptocurrencies and smart contracts also have manipulation risk. Also, how would monetary policy play out with unexplored digital channels for its transmission?
Prasad explains the underpinnings of Bitcoin and Blockchain and how they elegantly get away with the need for trust in digital transactions. However, the author dismisses the (initial) claim that cryptocurrencies would provide anonymity in transactions, and that “scarcity creates value”. The environmental footprint is also worrisome.
Due to unbacked currencies’ inherent volatility, the authors believe that “stablecoins”, such as CBDCs backed by fiat reserve currencies’ central banks (Fed, ECB, BoJ) or by large companies (e.g. Facebook’s Diem) have the most potential to become a widespread medium of exchange and store of value. CBDCs can be either account-based (individuals have accounts in CBs) or value-based (people have accounts in FIs, CB manages payment system).
The book is rich in examples. The author shows how financial innovation may provide solutions for financial inclusion and reduced money laundering (e.g. Uruguayan e-peso, Swedish e-krona); retail and wholesale CBDCs; international money transfers (Ripple), to substitute the old SWIFT system; credit access (LendingClub); insurance. With no powerful incumbent banks, EMEs could leapfrog when adopting innovations.
At the same time, Prasad is, throughout the whole book, cautious in his optimism. Due to the emergence of sophisticated financial products, the regulation work done by monetary authorities becomes way more intricate, which could easily spill out to the rest of the financial sector. Bank runs, confidence crises, gambling nature, and hacking pose new risks to the financial system. More volatile capital flows, and widespread adoption of foreign CBDCs, become a new danger for EMEs. Cryptocurrencies and smart contracts also have manipulation risk. Also, how would monetary policy play out with unexplored digital channels for its transmission?
April 21, 2022
After watching Larry David peddle crypto in a Super Bowl commercial I decided that it might be past time to begin understanding how Fintech was or was not changing what I learned three decades ago in finance class. Even though I was way out of date Cornell Econ professor Eswar Prasad has written a clear, well organized explanation of what is developing and why some of it matters and some of it doesn’t.
First the book provides an effective, clear explanation of how crypto works. Too many descriptions dumbed down the topic and left me confused about what is unique about the technology. There is a lot in the book, but, Prasad argues effectively that plenty is changing about Fintech, but we shouldn’t read too much into reports of the dollar’s demise. Instead , better to look to the benefits that technologies should bring to improve financial inclusion.
Prasad adds plenty of examples of what Central Banks are doing to just that. The real revolution is not an anonomous way to bypass sanctions or launder money or get rich quick, but instead to improve the lives of the unbanked.
A worthwhile read, especially for those of us that have come out of the avalanche of crypto hype a bit confounded and need to hear about what is really going on.
First the book provides an effective, clear explanation of how crypto works. Too many descriptions dumbed down the topic and left me confused about what is unique about the technology. There is a lot in the book, but, Prasad argues effectively that plenty is changing about Fintech, but we shouldn’t read too much into reports of the dollar’s demise. Instead , better to look to the benefits that technologies should bring to improve financial inclusion.
Prasad adds plenty of examples of what Central Banks are doing to just that. The real revolution is not an anonomous way to bypass sanctions or launder money or get rich quick, but instead to improve the lives of the unbanked.
A worthwhile read, especially for those of us that have come out of the avalanche of crypto hype a bit confounded and need to hear about what is really going on.
September 10, 2022
I had a very mixed response to this book, and could have justified a higher rating. My purpose in reading it was to learn more about digital currencies, including Bitcoin, starting from a position of almost zero background. The book met that need. However, I think I really needed a more basic book, along the lines of “Bitcoin for Dummies”. While I certainly know infinitely more than previously, I could only explain it at a very high level. Certainly I could never explain in detail what a “blockchain” is or how one goes about solving it, or how to mine for new Bitcoins. But the author tried to put some perspective on Bitcoin and its competitors, pointing out the differences. In the end, I got the message that digital currencies are here to stay, but that they will probably evolve. They cannot offer complete anonymity and the wide fluctuations in their value make them unsuitable as a store of value or medium of exchange. The future may lie with Central Bank Distributed Currencies which are tied to that country’s currency. I downrated the book because I found it difficult to read, as if it were a textbook. It was full of acronyms that I had to keep looking up. While I knew it was good for me, I dreaded reading it for long stretches. It was almost like a good exercise for my mind in the ongoing quest for knowledge. But some may like it better.
August 16, 2023
“The Future of Money” is pretty dense reading, yet written perhaps as engagingly as the subject matter allows, where the author is a high-level economics professor. A good chunk of this tome discusses cryptocurrencies and CBDCs. Prasad does so very ably, and even readers with minimal background (like me) on these digital instruments will follow the author’s explanations. I can now fairly effortlessly explain the basics of crypto, for example, to an average educated human being, though Prasad’s high-level, survey treatment of the material provides only a shallow understanding, so if anybody asks me more than a couple searching questions I’m at the end of my capacity to explain, even after lapping up “The Future of Money.”
The meat of this volume, and where it shines the most, is definitely the cryptocurrency material cited above. What drags “The Future of Money” down is the long, repetitive, and overly-detailed treatment of digital bank currencies in various countries. Each examination of a different CBDC seems to be more or less the same, and it really drags after 100, 200 pages. That’s the only blemish, for me, on this very informative and quite well-written book.
The meat of this volume, and where it shines the most, is definitely the cryptocurrency material cited above. What drags “The Future of Money” down is the long, repetitive, and overly-detailed treatment of digital bank currencies in various countries. Each examination of a different CBDC seems to be more or less the same, and it really drags after 100, 200 pages. That’s the only blemish, for me, on this very informative and quite well-written book.
May 1, 2022
This is a GREAT introduction and explanation of the world of bitcoin, cryptos, DeFi, etc. It covers the main topics, from the ‘building blocks’ of these technologies, ‘case studies’ of CBDCs, to the monetary policy and international implications of them. Further, it takes a very neutral and critical perspective, cleary discussing and highlighting the benefits and challenges of all these themes.
My main takeaway: the underlying technologies of crypto assets (blockchains, DLTs, among others) coupled with the idea of ‘tokenize’ anything (from a card or house to an art piece or a meme) are truly revolutionary and have the potential to fundamentally change, not just finance but almost all economic activities. Moreover, it is important to think about these issues not just from an economic and technical perspective, but also through societal and even ethical/ moral lenses.
Highly recommended.
My main takeaway: the underlying technologies of crypto assets (blockchains, DLTs, among others) coupled with the idea of ‘tokenize’ anything (from a card or house to an art piece or a meme) are truly revolutionary and have the potential to fundamentally change, not just finance but almost all economic activities. Moreover, it is important to think about these issues not just from an economic and technical perspective, but also through societal and even ethical/ moral lenses.
Highly recommended.
September 5, 2022
(read as ebook)
A decent review of recent financial innovations. Having being published in 2020, it was pretty relevant. A good explanation of cryptocurrencies/blockchain, but perhaps a bit too dismissive of non-government cryptocurrencies. Very much focused on Central Bank Digital Currencies (CBDCs). I think that the book was originally intended to be about CBDCS, but was expanded to cover more things. Very bullish on CBDCs.
Book got a bit repetitive, especially on CBDCs. Wish it had addresses the privacy implications a bit more. Good point that it's a bit absurd to expect the government to support physical cash simply so people can keep transactions private from the very government that is creating and backing the cash. Criminals that want to transact with each other should be forced to come up with their own currencies or methods of accounting, instead of benefiting from the very government they are undermining.
A decent review of recent financial innovations. Having being published in 2020, it was pretty relevant. A good explanation of cryptocurrencies/blockchain, but perhaps a bit too dismissive of non-government cryptocurrencies. Very much focused on Central Bank Digital Currencies (CBDCs). I think that the book was originally intended to be about CBDCS, but was expanded to cover more things. Very bullish on CBDCs.
Book got a bit repetitive, especially on CBDCs. Wish it had addresses the privacy implications a bit more. Good point that it's a bit absurd to expect the government to support physical cash simply so people can keep transactions private from the very government that is creating and backing the cash. Criminals that want to transact with each other should be forced to come up with their own currencies or methods of accounting, instead of benefiting from the very government they are undermining.
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