A recent report from the Annual Economic Report came with several insults on Bitcoin. According to the report, crypto is not money but a speculative asset. One which carries no real value. It highlighted that Bitcoin and other cryptocurrencies have very few redeeming qualities when it comes to the public good.
“By now, it is clear that cryptocurrencies are speculative assets rather than money. And in many cases are used to facilitate money laundering, ransomware attacks, and other financial crime.” A topic that has been debated since bitcoin came into the mainstream. Many people saying that it is just a tool used by criminals and it is not a real currency.
Bitcoin As A Currency
Recently, El Salvador has become the first country to make bitcoin a legal tender. People in the country can now buy, sell, and pay for services using bitcoin. Amid this have been rising debates about the viability of bitcoin as a currency. So far, El Salvador has seemed to have success with it. Pairing it as a second legal tender alongside the U.S. dollar used in the country.
There are many reasons behind the discussions of bitcoin as a currency. The high fees are a pain point for a lot of people that want to use it to pay for things. With regards to small transactions, these fees can add up fast. And sometimes the fees might end up costing more than the actual amount being paid.
Since a currency should be easy, simple, and fast to use, bitcoin simply does not meet these criteria.
For example, without an internet connection, there is no trusted way to carry out bitcoin transactions. Currently, about 47% of the world does not have access to the internet. That’s over 3 billion people who are cut off entirely from being able to use bitcoin, or cryptocurrencies in general.
There have been opinions of the use of paper wallets just being given to other people. But this would be a method based entirely on trust as there would be no way to ascertain if there are enough coins in the paper wallet. Or if there are any coins at all.
The volatility of bitcoin is another point that often comes up in the discussions of using it as a currency. Due to the wildly fluctuating prices, the value of bitcoins paid for goods or services might go down by the time the receiver has time to convert the coins into fiat. Thereby constituting a loss for the receiver.
Fears of the coin being used for illegal purposes like money laundering or purchasing illegal items also top the list. As bitcoin transactions can be anonymous because names are not associated with wallets.
CBDCs Are Good Digital Money
According to the report, the foundation of any monetary system is trust in the currency. This is why CBDCs are good. Central banks help to provide the ultimate unit of account. And CBDCs provides trust that is “grounded on confidence in the central bank itself.”
This is something that bitcoin does not possess. A backing from any governmental body or agency.
But this is also the appeal to a lot of investors. They want a currency that is not controlled by anyone. Hence a currency that cannot be manipulated by the governments for their own agenda.
The report further went on to state that the central banks help to provide units of accounts in the monetary system. This helps to show how the currency is being used and moved around in the system.
Central banks also help to protect the finality of payments. They ensure that the payments systems are running smoothly. And lastly, they help to oversee the payments system’s integrity.
CBDCs are quickly becoming more popular in the space. Countries like Nigeria have said that they plan to issue their own central bank digital currencies that will be the equivalents of the national currencies.