In an opinion piece published in the Financial Times on March 13th, Benoît Cœuré, Member of the Executive Board of the ECB and Chair of the Bank for International Settlements, laid out his reasoning for why cryptocurrencies will never replace cash.
Cœuré shares a similar sentiment with many in the finance and banking industry and starts by using the cliché argument that because people don’t price items in bitcoin, or price items in bitcoin only relevant to the value of state currencies, it is not a real currency.
“Almost nobody prices goods in bitcoin, few use them for payments, and, as a store of value, they are no better than gambling in a casino.”
The argument that bitcoin is not a real currency due to it being valued against state currencies and being too volatile is hardly original, with people like Warren Buffett and Jamie Dimon echoing the same sentiment.
Cœuré’s negativity towards bitcoin and cryptocurrencies does not end there; he goes on to state that policymakers are right to be concerned with their illicit uses and investor abuses. In a recent Ask Me Anything (AMA) on Reddit, Bill Gates said the same thing, claiming that illicit activity was one of the cryptocurrencies main uses. These views shared by notable public figures reflects the amount of misinformation about cryptocurrency and their usefulness circulating in society.
Although negative about bitcoin, Cœuré does concede that the cash will not be king forever, saying, “New research from the Bank for International Settlements (BIS) shows non-cash payments have roughly doubled in size, as a share of GDP, since the turn of the century. Some Nordic countries are already cutting back on cash. And the iGeneration is more likely to reach for a payment app than a purse. To their children, banknotes and coins may look like museum exhibits.”
The author of this article also concedes that there are shortcomings in the current financial system that digital currencies confront. He claims that important aspects of cryptocurrencies are their ability to be used across borders without conversion, their quick movement through payment channels, and the transparency of money moved through the blockchain.
In regard to these shortcomings, Cœuré closes his article by saying, “Improvements here are the best way of rising to the bitcoin challenge.”