Like all things in the modern world, money is becoming digital. In 2021, El Salvador took a step by becoming the first country to accept Bitcoin as legal tender. In 2023, the Bank of England began seriously exploring introducing a digital Pound. In 2025, the Trump Administration released an Executive Order, which, among other things, seeks the promotion of U.S. dollar-backed crypto currencies. These tentative shifts in the global monetary environment signal what could be a total transformation of the current landscape. While the transition to digital currency offers its share of positives, many of the concerns surrounding this shift are based on the security and volatility of these digital assets. The history of other monetary shifts is instructive in this regard. Specifically, the early adoption of paper money in the 18th century laid bare the issues of volatility, fraud, and theft that currently hamper public sentiments towards digital currency, and thus impede its adoption around the world.
Volatility
Digital currencies are viewed skeptically by the public in part because of their perceived volatility in the economic landscape. El Salvador’s attempt to introduce bitcoin as legal tender in the country has been walked back, in part because of these fears. In December, 2024, the nation reduced some of its crypto policies by allowing private business to choose whether or not to accept cryptocurrency. Further, government acquisition of bitcoin will be more tightly regulated in the future. This move was made in order to secure a loan from the IMF, which sees crypto as a volatile asset, in part because the value of Bitcoin rose and fell dramatically in December 2024.
Historically speaking, this sort of volatility is to be expected at the introduction and adoption of a new fiat currency, for instance during the initial adoption of the French Assignat. Introduced as a promissory note backed by the sale of French national land in 1789, by 1790 the National Assembly made the banknote a form of legal tender. Issuing notes faster than land could be sold, these notes quickly fell in value. By the end of 1795, the value of Assignat was only a quarter of 1% of the face value of the fiat currency. High volatility and poorly controlled monetary policy doomed the assignat, as it became distrusted and eventually repealed in 1797. The eventual downfall of the Assignat is instructive in this case, because it offers a cautionary tale on the adoption of a fiat currency that is both unbacked by government assets and uncontrolled in its issuance. El Salvador cannot unilaterally control the value of the currency, nor how much is held worldwide. As such, state monetary policy would be wise to more seriously consider overall asset stability before shifting large segments of national economies to accept volatile currency.
Potential for Fraud
In addition to volatility, digital assets face hurdles to adoption because they are seen as assets ripe for fraud. While Bitcoin has successfully washed away some of its veneer of fraud, likely by commanding significant market share in the cryptocurrency space, many other digital assets are suspected of being fraudulent in nature. Two recent examples, $Libra and $Trump, demonstrate the risks of fraud in this burgeoning space. $Libra, a cryptocoin shared by Argentine President Javier Milei, rose significantly in value before nose diving in early February, 2025. The results were disastrous for investors in the coin, who quickly accused Milei of fraud. Milei himself says he did not back the currency and acted in good faith, likening investing in the cryptocoin to gambling.
$Trump shared a similar fate, as value spike shortly after launching just before Trump’s inauguration in January 2025. Less than a week later, the coin dropped from its peak of $74 to just $13.2. While Trump himself has remained quiet on the cryptocoin, his family has continued advocating for the coin and has raked in significant profits as a result.
These “pump-and-dump” incidents, widely viewed as fraudulent in nature, are not without their own historical examples. The history of fraudulent joint stock companies is in this case instructive. Taking advantage of the promissory notes issued by the central banks of both England and France, joint stock companies were created. The South Sea Company and the Compagnie des Indes were two such companies who, backed by government notes and extensive trading monopolies in the Americas, issued publicly traded stock in the late 1710s. When the value of this stock rose significantly in the wake of the general excitement over colonial ventures, the companies began buying further assets and using additional public investment to pay back early investors, evoking methods that today are known as a Ponzi scheme. When investment dried up in 1720 and the companies did not show the profits expected of their inflated share price, the stocks collapsed and ruined investors.
Both incidents gave rise to increased scrutiny of unregulated markets, general distrust of joint stock companies, and new fears surrounding speculative investment. Potentially fraudulent crypto assets like $Libra and $Trump have the capability to sour investor sentiments towards digital assets, just as the fraudulent activity of the South Sea Company and the Compagnie des Indes deflated investment in joint stock companies. State banks and regulators should learn from these two cases and institute a strict regulatory environment if they are to successfully implement digital currency.
The Theft Barrier
Theft of digital assets remains a significant impediment to the adoption of cryptocurrencies in the wider monetary economy. While blockchain has made it significantly harder to steal assets, by nearly eliminating the possibility of retroactively altering transactions, the relative insecurity of crypto wallets, as well as the possibility of data breaches, means that theft is not impossible. On February 24, 2025, Bybit, a Dubai-based crypto currency exchange, faced a cyber attack that resulted in the theft of nearly $1.4 billion worth of Ethereum. Hackers from the North Korean Lazarus Group, exploiting vulnerabilities within the signing interface, siphoned the crypto assets to other wallets. While the exchange has been praised for their commitment to backing customer funds and several private and governmental organizations have launched a counterattack against Lazarus Group, only about 3% of stolen assets have been frozen.
Theft of banknotes was also a significant problem as they became more popular, and moveable, in the 18th and early 19th centuries. In England, highway robbery reached its zenith in the early 18th century in the aftermath of the English Civil War and the French Wars, as a plethora of moveable assets and destitute soldiers combined with a lack of governance and the absence of a police force. One of the great legends of this period, Dick Turpin, was a well renowned member of the Essex gang. While much of his story has been embellished by legend, he and his gang are noted not only for their skills in horse thievery, but also in monetary theft. In late 1734 and early 1735, Turpin and his gang stole significant amounts of money from homes and persons in and around London, which included banknotes and specie. In 1739, Turpin was eventually captured and charged with stealing three horses, though it is notable that violations of property, including the theft of money, constituted some of the most severely punished crimes in 17th and 18th century England. The story of Dick Turban, while embellished by folklore, is informative in that it displays not only the inherent risks in a more movable monetary form, but also the those inherent in the lack of a police force to monitor and deter theft. States looking to implement digital currency into their economy should likewise invest heavily in cybercrime units, to deter the threat of theft and other digital property crimes.
I am not a security specialist by trade, and as such have little to offer in terms of concrete recommendations for security officials as states seek to adopt digital currency. As an economic historian however, I can look at the past and glean lessons that may assist security professionals in the future. As the transition to paper currency in the 18th century demonstrates, the transformation in monetary form is not without its challenges. Issues of volatility, fraud, and theft significantly impacted the early adoption of paper money. These problems were eventually overcome, in part because governments implemented stricter controls on currency issuance, tightened the regulatory framework, and developed strong police forces to deter theft. The hurdles to adopting digital currency will likely similarly be overcome given enough time and governmental resources. The question ultimately is whether these governments will learn from the failures of the past or whether they will march into the future unprepared for the failures already committed by the generations before them.