Most people currently think of money as government-issued paper certificates or coins that specify units of currency, such as dollars or euros. The advent of digital currencies, which appear abstract because of their intangibility, is therefore confounding almost everyone.

This Article argues that money should also be viewed functionally—as a “right” that serves one or more of the generally accepted functions of money. The Article focuses on two of money’s most generally accepted functions: to serve as a medium of exchange to facilitate the sale of goods and services, and to serve as a store of value. To perform these functions, money must be transferable, ideally with low transaction costs, and also must represent something of value.

The implication of this functional analysis is twofold. First, this perspective can enable readers to understand, more intuitively, the changing nature of money and can help to de-mystify digital (that is, electronically evidenced) currencies. For example, the current differences between tangible and digital currencies relate principally to transferability, whereas the current differences among different forms of digital currencies relate principally to value. Second, viewing money functionally also can inform monetary regulation. In addition to the traditional goals of limiting third-party harm, monetary regulation should help to protect money’s functions by correcting market failures that impair the low-cost transferability or the stable value of whatever rights are becoming widely used as money. This “functional” approach would expand the proper scope of financial regulation beyond its traditional negative role, protecting against harm, to also include the positive role of helping to promote beneficial business innovations.