Andreas Rahmatian, Professor of commercial law at the University of Glasgow, in his column for Euronews shared an opinion that cryptocurrencies have no chance to integrate into the monetary system.
In the article, he reflects on whether cryptocurrencies can at all be considered money. First of all, the author defines money through the credit theories of money, where any note or coin issued by central banks is technically just a form of debt: if you have a dollar, this dollar bill actually is a liability on the balance sheet of the US Fed.
There is no problem with this bill being electronic nowadays because the central bank’s debt can exist as a computer record. Electronic cash can be considered money because it is created (and held) by the central bank. Even adding the crypto-technology Blockchain to the banking system would not change anything conceptually.
But a decentralized form of money is not able to define the issuer and makes it impossible to determine who owes whom.
The author also emphasizes the problems with cryptocurrency in terms of the functions of money. The author names three: a medium of exchange, a unit of account, and a store of value. Bitcoin fails to fulfil two of them:
- Medium of exchange. The value of money today consists only in an exchange value, which is underpinned by the legal and financial supervision of the banks. Bitcoin is completely unregulated and for that reason is unsuited for the role of medium of exchange in the author’s view.
- Store of value. Cryptocurrency is ill-suited to be a store of value due to extreme price fluctuations (which the author also notes for foreign currency quotations but doesn’t understand that is different)
The article creates a feeling that the only drawback of Bitcoin is that it is not created and issued by legally authorised banks. It seems that adequate legislation for cryptocurrencies could dispel all doubts of the author regarding crypto in the monetary system. Admirably, many countries are already developing legislation for cryptocurrencies. Let’s see if it’s enough to turn cryptocurrency into real money.
After all, people who used fur to trade could hardly believe that someday precious furs would be replaced by notes with dead presidents on them.