This research paper examines the potentially destabilising effects of emerging digital currencies on the international foreign currency exchange. Specifically, it examines Bitcoin, a decentralised, partially anonymous, and largely unregulated digital currency that has become particularly popular in the last few years.

Despite the potential advantages of digital currencies like Bitcoin, their wide-spread adoption faces a number of obstacles. First and foremost, economists are worried about the uncertainty surrounding the operation and growth of digital currencies. Because so much of the data on these currencies is either supplied directly by the issuer or scattered across the internet, it is difficult for scholars to draw any reliable conclusions on whether—and if so, how and when—these currencies might be widely accepted. Others criticise digital currencies like Bitcoin on a more theoretical level because they are neither intrinsically valuable, like gold, nor do they have roots in a commodity expressing a certain purchasing power. Some critics go as far as to describe digital currencies like Bitcoin as nothing more than a Ponzi scheme.

The paper argues that International Monetary Fund, the institution responsible for coordinating the stability of foreign exchange rates, is ill-equipped to handle the widespread use of Bitcoins and other digital currencies into the foreign exchange market. It highlights the inability of the Fund to intervene in the event of a speculative attack on a currency by Bitcoin users.

The paper concludes by suggesting an interpretation of the Fund’s incorporating document, the Articles of Agreement, which would allow it to intervene in the event of such an attack.