The Fed called bitcoin another type of fiat money

06/20/2020

ForkLog

Bitcoin is not a new formcurrency, and another type of fiat money, believe the economists of the New York branch of the U.S. Federal Reserve.

In an article on the organization's website, Michael Lee and Antoine Martin write:

"Bitcoin and cryptocurrencies are more broadly described as a new type of money.But bitcoin may be money, but it's not a new type of money."

They divide money into three categories: fiat, asset-backed and rights-based.

"Fiat money is worthless objects whose value is based on the belief that it will betaken as a means of payment in exchange for goods and services," they writeEconomists.

They are convinced that the money produced by central banks cannot be fully considered fiat, as they haveAt the same time, bitcoin is fully compliant.that definition.

“Examples of fiat money that do not have the status of legal tender are Ithaca watches and Rai stones. Bitcoin is just another example of fiat money, ”the article says.

At the same time, analysts say that cryptocurrency has one important feature that distinguishesall other monetary instruments.

“The real innovation of cryptocurrencies isthat they offer a fundamentally new exchange mechanism. This mechanism can support the transfer of various types of money: fiat money, as in the case of bitcoin; asset-backed money, as is the case with stablecoins; and even future services or products, as in the case of ICO tokens. This mechanism also supports the transfer of other types of assets, such as CryptoKitties, ”the authors write.

Michael Lee and Antoine Martin admit that until 2009, when bitcoin appeared, nothing like this existed.

Coin Metrics co-founder Nick Carter called economists' statements "madness," adding that they replaceHe recalled that the fiat is understood as a matter ofmoney released by the law, which cannot be repaid with gold or any other asset.

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"This means money being imposed under the threat of the use of force and the local monopoly of the state for use in society.Their value comes from a commitment that requires an individual to hold and use the currency," Carter wrote.

He added that bitcoin, just likerare shells, beads or stones of Paradise, possesses the properties of money, because society finds its unique features useful and forms around it. This makes cryptocurrency the exact opposite of fiat.

Earlier this week, Kraken CEO Jess Powell said that bitcoin is equal in its payment properties to the U.S. dollar and will eclipsegold as a means of saving.