Bitcoin and Ethereum are not currencies, says Sweden’s Central Bank
The Swedish Central Bank argues that cryptocurrencies lack sufficient stability to function as a store of value, medium of exchange or unit of account.
Following the many monetary authorities who have been dismissing bitcoin’s potential as cash, the Riksbank, the Central Bank of Sweden, explained the reason for its rejection in a Twitter thread.
Ett vanligt sätt att definiera pengar är att de ska uppfylla tre kriterier: Den ska fungera som värdebevarare, betalningsmedel och räkneenhet. Eftersom Bitcoin än så länge är den största kryptotillgången tar vi den som exempel. 2/9
— Sveriges riksbank (@riksbanken) May 20, 2022
The bank suggests that a proper currency must effectively function as a store of value, medium of exchange and unit of account, and since cryptocurrencies fail to serve these three primary functions, they are more like assets.
However, if money can store value, its purchasing power will remain roughly the same over time, being resistant to high inflation, but even the US dollar is starting to suffer from this – as its population is spending much more. and buying a lot less.
Bitcoin can also be considered more tangible, compared to fiat currency, as a medium of exchange, as few merchants accept direct Bitcoin payments. But you can see progress slowly being made on this front.
“Bitcoin price has had a high degree of volatility and is therefore a relatively poor preserver,” explains the Riksbank.
Bitcoin is still considered unsuitable as a unit of account, which is largely due to its volatility. In El Salvador, the first country to adopt Bitcoin as a legal tender, products are still mostly quoted in US dollars.