The debate over whether cryptocurrencies—more accurately termed crypto assets—possess genuine economic value has intensified in recent years. Criticism comes not only from central bankers and financial regulators but also from market analysts and academic circles. The core of this debate centers on two key questions: First, do crypto assets have intrinsic value? Second, does their rising market price prove such value exists? Without a clear answer to the first, the second becomes moot. If crypto lacks value, it cannot function as money, nor sustain its price levels. So, what exactly is the nature of value in digital assets—and do they truly possess it?
Is a Crypto Asset Actually "Money"?
When former Federal Reserve Chair Ben Bernanke was asked about Bitcoin during his tenure, he sidestepped the question by saying it wasn't under his regulatory purview. This careful response avoided directly addressing whether Bitcoin qualifies as money. Why such caution? Because no legal framework definitively defines what "money" is.
The U.S. Constitution grants Congress the power to coin money, which it has delegated to the Federal Reserve. This establishes a government monopoly on currency issuance—meaning no other entity is legally authorized to issue money. From this perspective, Bitcoin and other decentralized crypto assets clearly do not qualify as legal tender. They lack official issuance and state backing.
But legality isn't the only criterion. What about functional or economic definitions? Traditional economics often avoids defining "money" outright. Instead, textbooks describe money in terms of central banking frameworks—such as M1, M2, and so on—focusing on bank-issued liabilities like deposits and cash.
Historically, money evolved from physical coinage (under political economy) to bank money (under monetary theory). Each stage demanded new theoretical models. Today, we’re entering a potential third phase: digital money. Attempting to judge cryptocurrencies using outdated theories—like those designed for gold coins or banknotes—is fundamentally flawed.
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The Four Functions of Money—and Where Crypto Stands
Classical political economy identifies four essential functions of money:
- Unit of account (value measurement)
- Medium of exchange
- Store of value
- International currency
These aren’t definitions per se, but functional benchmarks. Can crypto fulfill them?
Bitcoin, for example, has been used as a store of value—often dubbed "digital gold." It also enables peer-to-peer transactions, satisfying the medium-of-exchange role in certain contexts (e.g., online markets). However, widespread adoption as a unit of account remains limited. Prices aren’t routinely quoted in BTC, and volatility undermines its reliability for measuring value.
Still, functionality doesn’t automatically confer legitimacy. Many assets can be traded or stored without being considered money—stocks, art, or even collectibles like rare sneakers. Their value exists within specific communities or markets.
Understanding the "Value" Behind Cryptocurrencies
"Value" itself is a contested concept. In classical economics, thinkers like Adam Smith and David Ricardo developed the labor theory of value, arguing that value stems from human effort. Others, like John Locke, laid early groundwork for this idea.
But modern economics has largely moved away from philosophical debates about intrinsic value. Instead, it focuses on price—a quantifiable outcome shaped by supply and demand. The shift from "value theory" to "quantity theory" reflects this change: money's worth is no longer tied to material substance (like gold), but to scarcity and utility.
Critics argue crypto has no inherent value because it isn’t consumable and provides no direct service—calling it “air” or “nothing.” Yet this logic could also dismiss stocks, bonds, or intellectual property, which are non-physical but widely accepted as valuable.
So where does crypto derive its value?
The Role of Digital Communities
The true source of crypto’s value lies within its digital ecosystems. Just as social media platforms gain worth through user engagement, crypto assets gain utility within blockchain networks. This includes:
- Enabling decentralized applications (dApps)
- Securing networks via proof-of-stake or proof-of-work
- Granting governance rights in decentralized autonomous organizations (DAOs)
This internal functionality creates demand. For instance, Ethereum’s native token ETH is required to execute smart contracts—giving it real utility beyond speculation.
The famous 2010 “Bitcoin Pizza Day,” when Laszlo Hanyecz paid 10,000 BTC for two pizzas, marked one of the first attempts to bridge internal utility with external economic value. While humorous in hindsight, it demonstrated that crypto could move beyond digital borders into tangible exchange.
However, frequent tradability or rising prices don’t equate to monetary status. Many speculative assets rise in price without becoming currencies. True monetary value emerges only when an asset becomes a widely accepted medium of exchange across diverse communities—a "digital currency" rather than just a tradable token.
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FAQs: Addressing Key Questions About Crypto Value
Q: Can something be valuable if it’s not physical?
A: Absolutely. Stocks, patents, and digital subscriptions all hold value without physical form. Value stems from utility, scarcity, and trust—not materiality.
Q: Does high trading volume prove crypto is money?
A: No. High liquidity shows market interest but doesn’t confirm monetary function. Art and luxury goods trade heavily too, yet aren’t considered money.
Q: If crypto isn’t money now, can it become money in the future?
A: Possibly. Money evolves. If crypto achieves broad acceptance for everyday transactions and stable pricing, it may earn monetary status—but that’s a process, not a declaration.
Q: Isn’t price determined by supply and demand? Doesn’t that define value?
A: Market price reflects perceived value at a moment in time. But long-term value depends on sustained utility. Speculative bubbles rise and fall; durable value comes from real-world use.
Q: Are stablecoins closer to real money than Bitcoin?
A: In function, yes. Pegged to fiat currencies, stablecoins offer price stability and are increasingly used in payments and remittances—key traits of monetary assets.
Q: Can governments stop crypto from becoming money?
A: They can regulate or restrict it, but innovation often outpaces policy. The key factor will be whether users adopt crypto voluntarily for its utility—not just speculation.
Final Thoughts: Toward a New Monetary Paradigm
Crypto assets undeniably possess value—but not necessarily the monetary kind. Their worth emerges from digital ecosystems where they serve functional roles: securing networks, enabling smart contracts, or representing ownership.
To become true money, crypto must transcend niche adoption and achieve broad acceptance as a reliable medium of exchange and unit of account. That transition isn’t guaranteed—it must be proven through sustained real-world use.
Declaring crypto as “money” based solely on price appreciation is premature and misleading. Like earlier forms of money, its legitimacy will be earned through practice, not proclamation.
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