Fighting boy Bitcoin – Bank of Finland finds: BTC is not a currency
The Bank of Finland denies that digital currencies like Bitcoin have any potential to replace cash and established currencies.
Last week the Finnish Central Bank published a study in which it underscored its critical stance towards crypto currencies. The paper bears the meaningful name “The great illusion of digital currencies” and was published by Aleksi Grym, the Bank of Finland’s Digitisation Officer. The analysis concludes that crypto currencies are not currencies, but “accounting systems for non-existent assets”. Grym sees crypto currencies as a special case of digital currency. However, it is not possible to digitize a currency, at least not without it leading to a centralized form of account management. Apart from the technical side, the innovative value of crypto currencies is very low.
What is money?
Before Grym reaches for his devastating criticism of crypto currencies, he first tries to clarify the question of what money actually is. He refers to the widespread and generally accepted view that money must fulfil the following three functions: First, it must serve as a store of value, i.e. its exchange value should remain approximately constant over time. This also means that it must be limited in quantity.
Secondly, money should serve as a transport medium for values
Its acceptance is based solely on the assumption that it can later be exchanged for other goods and services. Finally, money must meet the criterion of the unit of account, i.e. it must be able to be broken down into the smallest units defined in advance. This is what makes it possible in the first place to relate production costs to the selling price of a good or service. Grym, however, understands currency to mean money in circulation that is recognised as a means of payment in corresponding geographical or economic regions. As a “special case” of money, it is “practically synonymous with coins and banknotes”.