Cryptocurrency Finland 3 Jul 2018
Bank of Finland cryptocurrency research paper has examined the potential of cryptocurrencies a financial instrument. The paper tries to explain why the concept of a digital currency is a fallacy.
3 July, AtoZ Markets – The Bank of Finland (BoF) has published a paper entitled “The Great Illusion of Cryptocurrencies,” which was written by Aleksi Grym, the Adviser on Digitalization and Head of the Digital Central Bank process in the Financial Stability and Statistics Department.
With this paper, the bank attempts to explain why they believe that a concept of a digital currency is a “fallacy.” The paper outlines how the fundamental nature of cryptocurrencies “shows how poorly understood the concept of money itself still is today.” It also claims that the Internet and social media have “muddled our sense of fact and fiction.”
As per Grym, cryptocurrencies are not real currencies. He claims that they are “accounting systems for non-existent assets.” He further states that the digital ledger technologies, such as Blockchain, are actually similar to other record keeping systems. Mr. Grym states that digital; ledger technologies implementation for cryptocurrencies is “unrelated to the fundamental characteristics of money.” He writes:
“For all intents and purposes, that ledger is a centralized ledger. The fact that there are multiple synchronized copies of it, distributed across a network, is irrelevant, as each one has the same data.”
The paper refers to the several studies on Bitcoin and other cryptocurrencies, which presented assets in a negative light. Grym has also does not think that central bank issued digital currency is a viable idea, adding that it would “practically mean bank accounts at the central bank.”
Then, Mr. Grym asks the question “what is money?” adding that the definition has evolved through years. The paper highlights that money is not created “out of thin air,” but emerges from liquidity transformation.
As per this document, the key drivers for buying cryptocurrencies are different. They vary between criminal activities, security against state oppression, or forming a sense of community. The paper also mentions the excitement of trading as one of the primary impetuses to buy crypto.
The author also compares buying Bitcoin to the “intangible value” for some of the customers that buy “toys, fashion, art, club memberships, or firearms.”
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