Some people argue that Bitcoin is threatening and disrupting national currencies. Perhaps, this explains why some governments want to regulate Bitcoin. However, most people accept the cashless society’s principles and the need for a functional digital currency.
There’s no doubt that a digital world needs digital currency. And this will ultimately happen as the internet needs a single form of money. Some countries like China have already created their digital currencies to compete with Bitcoin. However, this virtual currency remains the most dominant and popular.
Even in countries where governments ban Bitcoin, citizens use platforms like Immediate Edge as their official trading software. Also called crypto exchanges, these platforms allow people to purchase and sell Bitcoin using major fiat currencies like the U.S dollar. Thus, people are using Bitcoin worldwide as an asset, value storage, or tradable commodity. But how will this affect national currency?
The Money Concept
It’s essential to determine whether Bitcoin is money to understand how it might affect national currencies. Some countries like France are against the idea of using Bitcoin and other virtual currencies as money. Instead, they refer to all cryptocurrencies as crypto assets. Thus, France does not see Bitcoin as a currency but as an asset. The French Central Bank argues that Bitcoin and other virtual currencies lack the essential functions of traditional currencies. These are value storage, payment means, and account units. What’s more, the French government is working on complex regulations and tax schemes for crypto assets.
But things are different in countries like Germany. Here, the government considers Bitcoin and other virtual currencies equal to the other legal payment methods provided the involved parties in a transaction accept them as contractual and alternative payment means and don’t have other purposes apart from using them as payment means. In Japan, Bitcoin has been a legal tender since 2017. Australia also announced that cryptocurrencies would serve like money from the same year.
Therefore, Bitcoin and other digital currencies have a complex global legal situation. Most countries are unsure about how to regulate virtual currencies. Nevertheless, Bitcoin is in the legal gray area in most places. Meanwhile, the crypto-ecosystem continues to develop with different merchants accepting Bitcoin as a payment method.
And if more people receive payments in Bitcoin, pay for services and goods with this virtual currency, national currencies usage will decrease.
On realizing the potential impacts of Bitcoin on national currencies, many countries have embarked on plans to create their digital currencies. For instance, China has developed a Central Bank Digital Currency. And this is a cryptocurrency from the central bank of China. The Marshall Islands, a small independent country in the Pacific Ocean, has also introduced Sovereign, a blockchain-based currency. This cryptocurrency will become the Marshall Islands legal tender for public charges, debts, dues, and taxes.
Physical money disappearance is, in many cases, on the agenda. Bitcoin and other virtual currencies provide better value transfer than traditional currencies. For instance, countries like Sweden have very few people using physical money. That means the world needs digital money.
Virtual currencies like Bitcoin provide a convenient and efficient way to transfer value. However, they may not change all paradigms of the current monetary system. For instance, many people use traditional currencies to purchase Bitcoin. That means they need conventional currencies to acquire Bitcoin because not everybody has what it takes to mine this virtual currency.
Like most things in life, money evolves. Virtual currencies like Bitcoin are most likely here to stay. And they will undoubtedly affect national currencies in different ways if they already haven’t. Whether Bitcoin will be the future global digital currency or not is a matter of wait-and-see.