The Denationalization of Money – Friedrich Hayek

The Denationalization of Money is a 1976 book by Friedrich Hayek, in which he advocates the establishment of competitively issued private moneys.

According to Hayek, instead of a national government issuing a specific currency, use of which is imposed on all members of its economy by force in the form of legal tender laws, private businesses should be allowed to issue their own forms of money, deciding how to do so on their own and have the currencies compete for acceptance. 

In 1978 Hayek published a revised and enlarged edition entitled Denationalization of Money: The Argument Refined, where he speculated that rather than entertaining an unmanageable number of currencies, markets would converge on one or only a limited number of monetary standards, on which institutions would base the issue of their notes.

Stability in value, Hayek believed to be the decisive factor for acceptance. That competition would favour currencies with the greatest stability in value since a devalued currency hurts creditors, and an upward-revalued currency hurts debtors. Hence users would choose the monies which they expected to offer a mutually acceptable intersection between depreciation and appreciation.

Hayek suggests that institutions may find through experimentation that an extensive basket of commodities forms the ideal monetary base. They would issue and regulate their currency primarily through loan-making, and secondarily through currency buying and selling activities. Hayek postulates that the financial press would report daily information on whether institutions are managing their currencies within a previously-defined tolerance.

This line of thinking lies at the basis of much thinking and development of cryptocurrencies today.