Is Cryptocurrency Money?

Is Cryptocurrency Money?

If there is one question that is asked repeatedly, argued often and debated from academia to the finance houses, it is this:

“Is cryptocurrency real money?”

The true believers answer in the affirmative. They are adamant.

Crypto, as they call it or “Bitcoin,” to the uninitiated, is indeed money. Not the greatest money, not the most stable, not a very good store of value, but money nonetheless.

The critics, on the other hand, refute this idea. To them, cryptocurrency is not money.

The critics advise that secret electronic codes stored in a decentralized ledger, are simply what they are. This means that crypto is not money and not currency.

It is a failure waiting to happen — or so they say.

To other critics, cryptocurrency must be entrusted to the governments of the world. It must be centralized and placed into the hands of a trusted third party.

Of course, many understand the principles underlying cryptocurrencies and that centralization is not a majority opinion.

Perhaps, the problem is that the wrong question is being asked. Maybe the question should be worded differently.

Why ask if crypto is money? How about asking if it is currency instead?

The Internal Revenue Service today issued a notice providing answers to frequently asked questions…

Source: IRS: Bitcoin is not currency

It appears that, at least in the United States, Bitcoin is property — intangible property. Not currency. Okay…

How about Germany?

German authorities have finally categorised bitcoin, labelling it as a “financial instrument”.

Source: Germany officially recognises bitcoin as “private money” – CoinDesk

So in the United States, crypto is property, but in Germany it is “private money.” Now we are back where we started.

Different answers from different countries, with one similarity. Both Germany and America — and European nations in general, want to regulate cryptocurrencies.

Bitcoin, the most popular of all crypto’s, is much easier to regulate than was thought. It has a visible blockchain — a way for anyone with a second rate cell phone to confirm the transactions of everyone else.

But back to nagging question. Let us make it easy on ourselves. Currency is money and vice versa. So Bitcoin and every other crypto is indeed, “private money.”

The next question is then one of quality.

Are crypto’s sound money or are they more like “checks” that vary in value?

True again. Crypto’s are drawn on/traded for fiat currencies and gold; and a million other things. And yet, this does not stabilize their value.

Add to this, the myriad of clearing houses (crypto-exchanges) and one can observe that a modicum of price stability is occurring. Albeit, very slowly and only temporarily.

Price stability is a critical, but value stability is the key, if a money-like crypto is desired. Gold, for example is fairly value stable. Only the respective and perceived revaluation of fiat currencies changes in relation to gold.

To have wide value fluctuations or be unable to save long term, crypto becomes a  questionable money. It may be rare, in a numerical sense, but it also perishable.

Certainly, Fintech will improve and thus require updated crypto’s…or some other invention will make money, as we understand it today, a quaint memory.

A memory to be collected by future historians. Ancient money technologies to be reviewed by bored economics professors in a hundred years.

But future historians will see the wider picture. They will know why innovators from the year 2016 and before, challenged the decaying financial systems of their world.

It was not an attempt, necessarily, to create perfect money. It was  — it is — an attempt, instead, to gain control of the monetary stagnation of the times.

From Bitcoin, many are now graduating to the CryptoNotes, however. Bytecoin, Monero and AEON are but a few.

In my next blog, I will tell you why many think that Bitcoin is on the “chopping block” and why privacy is fast becoming a necessity in Fintech.


Artwork by Mrnett1974 (Own work) [CC BY-SA 3.0 (, via Wikimedia Commons


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