Inside Money Creation in the Digital Era

Abstract

Every monetary instrument has emerged as a convention that gradually becomes “inside money,” which represents private social obligations accepted erga omnes within a community. Banks create “inside money” under a financing through money creation (FMC) model based upon the very process of credit creation and the reputation of the banks that take part in this process. Meanwhile, online and offline communities have created complementary instruments around different targets, ranging from meeting local credit demand and stimulating local economies, to achieving social and political reforms. Within this monetary universe, this chapter will focus on the emergence of “cryptoassets” and the conventional bases needed for their gradual diffusion through different social finance paradigms. This chapter will argue that the very creation of a “cryptoasset” will not create an “inside money.” Just as Darling, J. explained in the case Moss v Hancock, these instruments require a quasi-universal level of acceptance within a digital community to be recognized as money. In other words, if we want to create social “cryptoassets” that go beyond the definitions of speculative commodities and securities, we have to build on monetary conventions. To understand this key element, we open this chapter with the analysis of the socio-legal definition of “money,” and from this introduction, we are going to highlight the relevance of conventions and network effects to create “inside monies” and “outside monies” within new digital environments. Our goal is to see if we can define “cryptoassets” as money and consider how to diffuse these cryptographic innovations as such.