Is Bitcoin Money? It Depends on Who You Ask
For Crypto Coins News last year, I wrote an article about the difference between money and currency, and where Bitcoin fits into the global economy. The differences can be highly nuanced based upon your point of view. Economic experts like Mike Maloney have delved into this subject and explained the real-world implications of how money is defined through his online videos. How a dictionary sees money is different. How governing bodies define money is different. BitConnectlooks into the confusing, and sometimes self-serving, the definition of money both now and in our digital future.
It is a tricky question to answer. Gold coins used to be frequently used as money, but in the times of the Roman empire, copper was mixed with the gold to dilute the value and create a wealth transfer from the people to The State. If you had a gold coin, would you know how pure the gold is? Would you know if the core was tungsten or copper, and it was just gold plated? Money is as much about perception as any other factor in regards to its valuation.
The U.S. Dollar is perceived as valuable, at least, relative to other fiat currencies. Most people don’t know that the value of a U.S. Dollar has dropped about 97% of the past century. A car used to cost $100 USD 100 years ago. today, the average new car costs over $33,000. Yes, all new cars had relatively new technology back in 1915, as well. they were competing with horses! The U.S. Dollar is what has really changed in value, but most people have been conditioned to not understand the underlying economics of the situation and the loss of value, which is one of the conditions of money.
That is really the primary difference between money and currency. Bitcoin was nothing seven years ago and has amassed over $400 USD in value, so it is gaining value over time, versus virtually every fiat currency losing value over the same period. They are called fiat currency, not fiat money, for a reason.
So, according to economic expert Mike Maloney, and others, Bitcoin would qualify as money…..but not so fast! Is this the textbook definition of money? The Merriam-Webster dictionary defines money thusly:
Full Definition of Money
plural moneys or mon · ies play \ ˈ m ə -n ē z\ 1: something generally accepted as a medium of exchange, a measure of value, or a means of payment
“Generally” might be the key word in this definition. Bitcoin seems to cover all of the other parameters. It is a medium of exchange, a measure of value, or means of payment, but not everyone accepts it, so it may be money depending on if you are on Fiverr, Backpage or expedia.com, which accept it as money. If you go to pay your taxes with it, not so much. This leads to bigger questions.
If you have a check for a million dollars in your hand, you can’t use that check to get on a subway, or pay a parking meter. It is not money “generally accepted” for those as a medium of exchange, but isn;t a check “money?” You can’t go to the Porsche dealer and buy a 911 Turbo with two wheelbarrows full of pennies, but aren’t pennies “money?” So money is highly subjective, and not everyone agrees on what it is in every situation.
The United Nations Research institute for Social Development went so far as to investigate the matter and invest in this process. Their view on it bases it on the number of people who accept it as payment overall. their report, titled “How Can Cryptocurrency and Blockchain Technology Play a Role in Building Social and Solidarity Finance?” sees it this way:
“Bitcoin…..has no geographically and politically discreet real economy in which it is dominant. It thus does not tend to be a primary unit of pricing in any economy—very few vendors explicitly price their goods in terms of Bitcoin as a unit of account—and it is also not widely perceived as a means of exchange. Thus, while it has the potential to be a currency unit, in practice few people actually use, or perceive, Bitcoin as money in a traditional sense.”
It is estimated that five to ten million of people worldwide hold Bitcoins, and over 100,000transactions take place daily. Is there a threshold to reach to become money? I was not aware of this. If a country has 20,000 people and one fiat currency plan PayPal, and everyone accepts both as a form of payment, are they both money? Are neither money because only 20,000 people are using them daily, and that is not enough for the U.N. ? This is a squiggly line to draw in the sand. The UNISRD may need to explain that again.
The IMF has also weighed in on the subject with their report “Virtual Currencies and Beyond: Initial Considerations” and chooses to break the requirements into three categories, which they deem Bitcoin does not reach in a satisfactory fashion. One, it is too volatile to be a reliable store of value, which is a fair assessment.
The network of accepting merchants and users is too small, which ties into the UNISRD’s specious quota system, so that is a less useable argument against Bitcoin. Third, products are not generally priced in Bitcoin as a unit of account, but in a national currency instead, which is accurate.
So who is right? Some make more compelling arguments than others, but the fact that both the United Nations and the International Monetary Fund felt the need to commission an investigation, and cannot dismiss Bitcoin out-of-hand, says a lot. There was a question in their mind, or else why would they bother?
Their answers seem to indicate that it’s only a matter of time, acceptance and volume stopping Bitcoin from reaching their arbitrary monetary definitions, which can vary based on location and type of transaction. In the United States and Australia, Bitcoin ATMs, merchants and exchanges are not uncommon. In Peru or Chile, the Bitcoin climate is very different.