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Researchers at Freie Universität Berlin investigate a fundamental change in the crypto sphere in their latest study
A recent study published by political scientists at Freie Universität Berlin, Christopher Olk and Louis Miebs, indicates that the global cryptocurrency system has been undergoing significant transformations. The crypto system, which was originally intended as an alternative to currencies that depend on a central authority like the state or banks, has developed into a credit-based shadow banking system.
That is why the researchers advocate a reevaluation of cryptocurrencies on a political level, in which regulation is given greater attention in a way similar to traditional banks. The following questions become pertinent in light of the latest developments: Who will be allowed to create money in the future, and what regulations will apply? The study titled “A Credit Theory of Anti-credit Money: How the Cryptocurrency Sphere Turned into a Shadow Banking System” was published in the Review of International Political Economy and is available at: https://www.tandfonline.com/doi/full/10.1080/09692290.2025.2476738
The starting point for the analysis is the crypto crash of 2022, when stablecoins like TerraUSD or the cryptocurrency exchange FTX collapsed. According to the researchers, these incidents were not isolated cases of fraud, but were instead symptoms of a systemic development. Cryptocurrencies increasingly began to function as money, but only because centralized platforms created credit relationships, provided liquidity, and allowed for convertibility with sovereign money.
The researchers believe that “stablecoins” – crypto assets pegged to national currencies – in particular meet the definition of “shadow money.” They appear to offer price stability and ensure convertibility into sovereign money without having to be securitized by the state. In doing so, they adopt central functions of the financial system while also existing in a regulatory gray area. “The creator(s) of crypto originally intended for them to serve as an alternative to the conventional bank-based monetary system,” explains coauthor of the study Christopher Olk. “However, it has taken the opposite trajectory. The crypto sphere today is dominated by shadow banks and has become a fixed component of the conventional monetary system.”
According to the study, centralized cryptocurrency exchanges like FTX now act similarly to banks but without a banking license or regulatory banking oversight. Their financial practices often entail major risks, making them susceptible to bank runs – which is precisely what happened in 2022. The result was a loss in trust that spread across the entire crypto ecosystem and wiped out assets worth billions of dollars. “We are well acquainted with this phenomenon after 500 years of capitalism,” says Olk. “In times of low investment returns, private actors tend to develop new forms of credit that are designed to work like money but are not regulated like money. When the bubble eventually bursts, there are two options: Either the state saves these new forms of currency and regulates them – like after 2008 – or they vanish into thin air.”
But the crypto system has not vanished. On the contrary, thanks to the support of political actors – for example as a result of Donald Trump’s second presidency – it has soared to new heights. The authors have taken this as an indication crypto’s integration into the state-supported financial system will continue to progress and believe that this development will require a clear political response. “The crypto sphere has found itself at a crossroads,” says coauthor Louis Miebs. “Either it will be more regulated and thus receive a new legitimacy, like what is currently happening in the EU, or it will remain a systemic risk area, with the next crisis being just a matter of time.”
Further Information
Publication
Olk, Christopher, and Louis Miebs. 2025. “A Credit Theory of Anti-credit Money: How the Cryptocurrency Sphere Turned into a Shadow Banking System.” Review of International Political Economy, April, 1–28. doi:10.1080/09692290.2025.2476738.
Available online at: https://www.tandfonline.com/doi/full/10.1080/09692290.2025.2476738.
Christopher Olk, Otto Suhr Institute of Political Science, Freie Universität Berlin, Email: christopher.olk@fu-berlin.de
Louis Miebs, Otto Suhr Institute of Political Science, Freie Universität Berlin, Email: louismie@mail.de
https://www.tandfonline.com/doi/full/10.1080/09692290.2025.2476738
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