Crypto and US Currency/Security Hybrids

One of the long-running debates raging around cryptocurrency is whether a particular crypto is actually a currency or a security. The monetary history of the United States can shed light on this debate. In the past the US government issued instruments that performed both functions simultaneously. I will give two examples.

The Continental Dollar has become infamous as a failed attempt to fund the Revolutionary War by printing money. However, this is not the whole story. As Dr. Farley Grubb has pointed out, Continentals were basically zero-coupon bonds issued in small denominations. However, the plan collapsed when the Congress changed the original terms of repayment, rendering the notes valueless.

During the US Civil War, the Interest Bearing Note was created to act both as currency and as a security. Issued in denominations as low as $10, the notes paid 5% interest. This interest would be paid when the note matured and was turned into the Treasury. These notes were a success and were paid off as promised by the US Treasury.

This analysis tells us that being a currency and a security are not contradictory and that a cryptocurrency can be both.