JUDGINGJOHNNY: How cryptocurrencies could impact the multiplier effect of fiat currencies

When fiat currency is mentioned to the cryptocurrency world, what typically comes to mind is government control, printing of money, loss of purchasing power, banks, lending agencies of control, inflation and currency devaluation. However, most people do not hear about or understand the main component of the ‘ecosystem’ of the fiat currency, the multiplier effect. By having a better understanding the ‘ fiat ecosystem’, one could have a better understanding of the potential impact of cryptocurrencies will have on the world’s money supply.

As defined by Investopedia, “The multiplier effect is the expansion of a countries money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold as reserves. In other words, it is the money used to create more money and is calculated by dividing total bank deposits by the reserve requirements.”

How disruptive will cryptocurrencies impact the multiplier effect? Could this be the real reason why governments who like to control the money supply are so much against cryptocurrencies? When someone wants to buy a cryptocurrency, most people will go to an App like Coinbase, setup an account and fund the account by some type of bank transfer. This transaction alone would be taking fiat currency out of circulation. Coinbase then would take their fee from the transaction, and deposit the money into a bank account.

With the money going back into the banking system, the banks will then be able to lend the money out again. But where is the multiplier effect in this type of transaction? The multiplier effect only happens when money is lent out and then redeposited bank into another bank account to be lent out again. Is the term Multiplier Effect another name for Double Spend through a complex ledger system within the fiat ecosystem? Or does the Multiplier Effect continue to work but in the form of cryptocurrency?

Cryptocurrencies haven’t been around long enough to really study this type of impact on the fiat money
supply. Can there be a mesh between cryptocurrency and fiat currency? There will be surely more to come of
this with more insight from Russia. Maybe this is why Russia is on the fence in creating a “CryptoRuble”.
The article on cointelegraph.com titled, “Putin Adviser Say’ CryptoRuble’ Will Circumvent Sanctions,
Government Remains Divided”.