The Swedish central bank Riksbank, argued that Bitcoin and Ethereum are not currencies as they lack the stability to function as a store of value or a medium of exchange so let’s read more today in our latest cryptocurrency news.
The Swedish central Bank joined a group of other monetary authorities in rejecting BTC’s status as a currency and argued that cryptocurrencies are just poor at serving the primary roles of money and resemble assets instead. Riksbank explained that proper money should function as effectively as a store of value, a unit of account, and a medium of exchange. If money can store value, it means that it has purhcasing power that will remain roughly the same acorss time or drop at a negligible rate. In order words, it will likely be resistant to high inflation which is something that even the US dollar has been known to suffer from.
Most BTC bulls push the asset as an inflation hedge and value storage tech because it has a fixed supply and immunity to monetary debasement. But neither BTC nor other cryptocurrencies operate this way in real life. Crypto prices are correlated with the stocks and tend to move at the call of the Federal Reserve:
“The price of Bitcoin has had a high degree of volatility and is thus a relatively poor preserver.”
Bitcoin pales in comparison with the fiat currencies as a medium of exchange and so a few merchants accepted direct BTC payments so far. According to Coinmap, there are about 29,500 BTC ATMs and merchants globally versus the 60 million merchants which accept Visa. Progress is being made on this front but Bitcoin payments company Strike partnered with Shopify and NCR that bring BTC payments to in-person retailers in the US later this year. The Visa survey shows that 25% of the small merchants in 9 countries are planning to integrate crypto payments in 2022.
With that said, BTC is still unsuitable as a unit of account which happened because of its volatility. BTC stood at $69,000 in November but then dropped as low as $25,000. Even in El Salvador, the first country to adopt BTC as a legal tender, the products are still priced in US dollars. Last month, the Bank of Canada made a similar criticism of BTC’s potential as an inflation hedge and the nation suffered from high inflation with the political leaders pushing BTC as a potential solution.
The Monetary authorities from the Federal Reserve and the ECB dismissed Bitcoin’s potential as money and the prior was chosen to focus more attention on the stablecoins for the regulatory purposes as crypto assets that are value pegged to fiat. In an interview recently, the FED Chair Ben Bernanke explained why he even denied BTC’s future potential as a store of value:
“Gold has an underlying use value – you use it to fill cavities. The underlying use-value of Bitcoin is to do ransomware or something like that.”