The evolution of money has progressed through several distinct phases: the pre-coin era, the coinage era, the bank money era, and now, the emerging digital currency era. Just as coinage theories could not fully explain the practices of bank money, applying coinage or bank money doctrines to digital currency practices is equally forced and inadequate.
Recently, criticisms against cryptocurrency (also referred to as crypto assets) have intensified. These critiques come from central bankers, financial regulatory authorities, market participants, and academics. The debates focus on two central questions: First, do crypto assets possess any "value"? Second, does their rising market price validate that value? At the core is the issue of "value." Without it, the concept of "money" doesn’t apply, and the price foundation collapses. So, we must ask: Do crypto assets have value? If so, what is the nature of that value?
What Constitutes "Money"?
When former Fed Chair Ben Bernanke was asked about Bitcoin at the end of his term, he replied, "It’s not under my regulatory purview." This was a careful response—one that sidestepped the question of whether Bitcoin is money. Why avoid the question? Because no law explicitly defines what "money" is. The U.S. Constitution grants Congress the power to coin money, a responsibility delegated to the Federal Reserve. Thus, the government holds a monopoly on money issuance. From a legal standpoint, crypto assets like Bitcoin are not "money" because they are not issued by a recognized monetary authority.
But what about in substance? Could crypto assets function as money? Academic sources like The Palgrave Dictionary of Money and Finance do not have a standalone entry for "money." Instead, they include an entry on "money in economic life," which is lengthy and avoids a clear definition. There is, however, a definition for "currency," which includes notes and coins—a description that doesn’t fit digital currencies.
Economics textbooks also often evade defining money directly. Typically, "money" is discussed from a central banking perspective, referring to "bank money" within the commercial banking system. A broader view takes us back to political economy and the era of "coinage." Theories of coinage and bank money belong to different intellectual traditions. As money evolved, so did the theories explaining it.
This historical progression shows that monetary theory must adapt to new realities. We are now entering the digital currency era, and applying old frameworks to new forms like cryptocurrencies is unproductive. Political economy describes money’s functions—as a unit of account, medium of exchange, store of value, and international currency—but doesn’t define what money is. Using these older concepts to judge crypto assets is logically problematic.
The Concept of "Value" in Money
"Value" is a foundational concept in political economy. Mercantilists, drawing from commercial experience, concluded that only gold and silver constituted "wealth." This view emphasized security and liquidity, linking wealth directly to currency.
The Physiocrats, like Quesnay, shifted the focus to the source of wealth, which they believed was land. Adam Smith, influenced by his time in France, investigated the origins of value, leading to David Ricardo’s labor theory of value (though John Locke had earlier proposed similar ideas). This established "value" as a central concern, often equated with wealth.
But does value equal wealth? The question invites deeper philosophical inquiry. Note that value is not an innate economic concept; it emerged from debates about wealth. Even the labor theory of value didn’t deny the value of precious metals. Marx famously stated, "Gold and silver are not by nature money, but money by nature is gold and silver." This highlighted the social and political dimensions of value, transcending earlier views.
Modern economics moved away from these philosophical debates to focus on price. The "quantity theory" of money replaced "value theory," and the strict quantity constraints of the coinage era gave way to the flexible, expansionary policies of the bank money system.
A common rough definition suggests that something can become money if it has value and is widely accepted. But this is not a firm rule—it’s a possibility, not a certainty.
Does Crypto Asset Have Value?
Some argue that crypto assets have no value because they are not consumable goods or services—they are "virtual," "nothing," or "air." This criticism echoes historical objections to gold as money: "You can’t wear gold or eat it." Crypto assets lack physical attributes, so they don’t have value in the traditional sense. But the same could be said for equities, warrants, or patents—these aren’t consumed directly but represent claims or rights.
If not physical, is their value based on rights, like stocks or paper gold? Critics say no, arguing that traditional rights-based assets can eventually be converted into goods or services. Proponents counter that crypto assets can be exchanged for fiat currency, which can then be used for consumption. But this confuses price with value.
The value of crypto assets lies primarily within their digital communities. Their functionality is realized in these environments. Dismissing their value requires ignoring this digital utility—a fundamental fact. Measuring or transferring that value is an internal process, not easily judged from outside.
The famous Bitcoin Pizza Day—May 22, 2010, when Laszlo Hanyecz bought two pizzas for 10,000 BTC—was a landmark event. It marked the first major attempt to give crypto assets external utility.
Within their native digital communities, crypto assets operate based on initial rules and ongoing evolution. To move beyond these communities into others—or into the physical economy—they must prove their usefulness through practice. Being tradable or having a high price doesn’t confirm monetary value; many goods and services have these attributes. Crypto assets must become cross-community "digital currency" to begin approaching the status of money.
What is digital currency? What is monetary value? These are questions for practice, not theory. Throughout history, new forms of money emerged to meet economic needs and solve practical problems—they weren’t designed through abstract argument. Therefore, claiming that crypto assets inherently possess the "value"属性 of money is not just premature—it’s groundless.
It’s crucial to distinguish: supply and demand determine the market price of crypto assets, but that price shouldn’t be mistaken for inherent "value." Value derives from utility within digital communities. Based on that utility, crypto assets might become carriers or channels for digital currency. But declaring that they already have the value属性 of money is unsupported and potentially misleading.
👉 Explore strategies for evaluating digital assets
Frequently Asked Questions
What defines something as "money"?
Money is typically defined by its functions: it acts as a medium of exchange, a unit of account, a store of value, and sometimes as a standard for deferred payment. While governments often issue legal tender, systems like cryptocurrencies challenge traditional definitions by operating decentralized.
Why do critics say cryptocurrencies have no value?
Skeptics argue that cryptocurrencies lack intrinsic value because they are not physical commodities, cannot be consumed, and are not backed by any government or central authority. Their value is seen as speculative and dependent purely on market demand.
How can cryptocurrencies have value if they're not physical?
Value in cryptocurrencies arises from their utility within digital ecosystems—enabling transactions, providing security through cryptography, and functioning within decentralized networks. Their value is also influenced by scarcity, adoption, and the technological innovation they represent.
Can cryptocurrencies become widely accepted as money?
For cryptocurrencies to act as money, they need wide acceptance for transactions, price stability, and scalability. While some businesses accept them, volatility and regulatory uncertainty currently limit their role as everyday money.
What is the difference between price and value in crypto?
Price is the current market rate at which a cryptocurrency trades, often driven by speculation and supply/demand. Value refers to its underlying utility, technological foundation, and long-term potential within digital economies.
Are cryptocurrencies a good store of value?
Some, like Bitcoin, are called "digital gold" and seen as stores of value due to their limited supply. However, high volatility challenges this function compared to traditional stores like gold or stable currencies.