Sweden’s central bank, otherwise known as Sveriges Riksbank, has recently delved deeper into Bitcoin (BTC) to determine whether the king’s coin can be classified as a currency. It stated that it must meet three criteria to be considered a currency, namely: store of value, means of payment and unit of account.
No reliable store of value
The central bank indicated that Bitcoin is not a reliable store of value due to its volatile nature. It said the following:
“If an asset acts as a store of value, you have to be confident that you can buy about as much today for, say, 100 Swedish kronor as tomorrow. Bitcoin’s price has had a high level of volatility and so is a relatively poor protector.”
The Riksbank also indicated that despite being accepted as a means of payment in a small number of places, BTC is not nearly as widely accepted as credit cards:
“If the asset acts as a means of payment, a buyer must be able to use the asset to pay and a seller accepts it as payment. There is no exact figure on how many companies accept Bitcoin as a means of payment, but Coinmap has a map service of several merchants that accept Bitcoin and ATMs where you can buy Bitcoins. On May 13, 2022, there were approximately 29,500 merchants and vending machines on the map. By comparison, Visa cards are accepted by more than 60 million merchants.”
Volatility at fault
The central bank also stated that Bitcoin cannot be used as a unit of account due to constantly changing prices. It stated the following:
“If the asset functions as a unit of account, it can be used to price goods and services. The two features above come into play because it is more difficult to price something if the value of the asset fluctuates a lot or if it is not used as a means of payment.”
Bitcoin doesn’t match 3 criteria for money
Finally, it indicated that because Bitcoin does not meet the three criteria for money, it considers BTC only as an asset, but not as a currency:
“Bitcoin generally does not fulfill the three functions and thus is not money, at least not in the sense that it functions as money in the traditional financial system and in society. Similar reasoning can be applied to many other cryptocurrencies.”
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