It seems that researchers from Federal Reserve (FED) grudgingly admitted that Bitcoin is New Money!
Well, in fact, these two economists from the Federal Reserve stated that Bitcoin is not New Money and tried to convince readers of this article that Bitcoin is just another fiat currency while proving in the main part that Bitcoin is actually a new form of money created in 2009 and that nothing similar existed before in all financial history.
I guess that calling something not new and then proving with your study that this statement is wrong makes sense to the FED.
“Bitcoin, and more generally, cryptocurrencies, are often described as a new type of money...This is a misconception. Bitcoin may be money, but it is not a new type of money.” - FED
First of all, finally, we see an admission that Bitcoin is money. Still, they try to convince the reader that Bitcoin is a new exchange mechanism, while it is not new money.
“The real innovation of cryptocurrencies is that they offer a radically new exchange mechanism,”
They make three distinctions of money naming them i)fiat, ii)asset-backed, and iii) claim-backed while categorizing Bitcoin as fiat money and claiming that fiat money has no intrinsic value because the bill (the paper) costs almost nothing. Meanwhile, they skip the part that there is a cost to produce Bitcoins and this cost is rising as the network is growing stronger. Anyway, they back the central bank fiat currencies claiming that they are "different from pure-fiat" because of their legal-tender (which is basically the trust we put on our governments).
The article then goes on trying to explain that Bitcoin is only a new exchange mechanism. This basically is a mistake from the part of these economists. A Central Bank National Fiat Currency has as forms physical paper money and metallic coins, plastic (debit/credit/prepaid cards) and electronic form (mobile apps, e-commerce). But the third category where they put Bitcoin is something that does not exist. They just added Bitcoin on a column with the title "Fiat Money" and this proves that Bitcoin is Fiat? Is this a magic modern economy twist? Cause noone gets it. I can easily change the column title from "Fiat Money" to "Potatoes" and make the same sense. I don't even care to discuss Tether and ICO's which they put on the same bucket. These are not autonomous mechanisms.
Bitcoin is electronic and does not demand a third party to authorize transactions because it is a new form of money. It is not ruled by anyone. The exchange mechanism is electronic but no one controls it. All the rest types of money in this table are not autonomous mechanisms. Bitcoin is autonomous. It is decentralized and runs under consensus rules that require the overwhelming majority of all participants to agree in order to proceed.
This is what baffles banks. This is what they don't get and keep failing to grasp.
Bitcoin is new money and it is not just about a few people but all people. Frankly, this article did validate to me that Bitcoin is a new form of money never seen before. I think that it was a good step but they just scratched the surface.
Move over old money
This article was originally posted on my account on Uptrennd