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In the past, when countries have, like Afghanistan, tumbled into chaos and conflict, wealthier people have either relied on paper money (such as dollar bills) or precious metals (such as gold) to store their wealth. Sometimes they turned to chains of Islamic brokers (this is known as hawala) to send money across borders. Now crypto is creeping in, and while this may still be at a nascent stage, the development should make us ponder the slippery topic of trust and “credit” in finance.
The issue at stake is nicely laid out in a recent paper by Hyun-Song Shin, an economics professor at Princeton and chief economist of the Bank for International Settlements. He argues that the best way for an economist to look at cryptocurrencies such as bitcoin is to recognise these tokens only have value because people create a shared computing ledger of transactions to create a sense of trust.
https://www.ft.com/content/a5fcc1f4-617f-415e-aff5-6182c8d07379
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