Question

Why are cryptocurrencies, like Bitcoin and Ethereum, not considered to have the same economic function as fiat currencies like the United States Dollar (USD)?

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Cryptocurrencies are not a medium of exchange or a unit of account.

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Fiat currencies can be used for borderless transactions, while cryptocurrencies cannot.

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Fiat currencies are generally more volatile than cryptocurrencies and, therefore, more desirable.

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Cryptocurrencies are not regulated or centrally controlled, so their stability is uncertain.

Answer 1

- Cryptocurrencies are not a medium of exchange or a unit of account. — Selected: True.
Cryptos are used for payments in some places but are not widely accepted as a medium of exchange and are rarely used as a unit of account for pricing goods and services.

- Fiat currencies can be used for borderless transactions, while cryptocurrencies cannot. — Selected: False.
Cryptocurrencies are inherently borderless; fiat can cross borders too but typically requires intermediaries, exchange, or controls.

- Fiat currencies are generally more volatile than cryptocurrencies and, therefore, more desirable. — Selected: False.
Cryptocurrencies are generally more volatile than major fiat currencies; greater volatility typically makes them less desirable as a stable store of value or unit of account.

- Cryptocurrencies are not regulated or centrally controlled, so their stability is uncertain. — Selected: True.
Many cryptocurrencies are decentralized and lack central-bank backing; regulatory regimes vary and that, plus low liquidity and speculative demand, contributes to uncertain stability.