How Bitcoin Affects National Currencies

Business » FINANCE | September 12, 2022, Monday // 07:30
Bulgaria: How Bitcoin Affects National Currencies pixabay.com

Many governments have attempted to ban or regulate Bitcoin with little success. While China banned all cryptocurrencies in 2021, making Bitcoin illegal in the country, other countries have not been so successful. While most countries still do not consider Bitcoin a legal currency, they have allowed its use. With helpful platforms like the Bitalpha Ai, which you can find in bitalpha ai io, you can get all the support you need in this foray. 

One of the reasons that governments are attempting to ban and do away with Bitcoin is because they consider it a real threat to their national currencies. Bitcoin is a digital currency, and many businesses accept it as a legitimate means of payment. A growing number of employers are also paying their employees using Bitcoin.

Bitcoin Vis-à-vis National Currency

So, does Bitcoin threaten national currencies? There's no straightforward answer to this question. To date, Bitcoin has not replaced any national currency completely. Even in countries like India and Japan, where cryptocurrencies are prevalent, their respective national currencies remain widely relevant and popular.

There's no doubt that Bitcoin and other cryptocurrencies are gaining momentum. For example, over 109 million entities use Bitcoin, from individuals to institutions and even governments. The widespread use means that more transactions that would otherwise have used national currencies now use Bitcoin.

Despite efforts to curb or check the growing popularity of Bitcoin, it is clear that Bitcoin is here to stay. However, Bitcoins are limited. The highest Bitcoins' number that can ever exist is 21 million. And this is negligible compared to the number of notes of coins that governments print and issue. The implication is that Bitcoin alone cannot replace national currencies.

But, remember that Bitcoin is only one among many other cryptocurrencies. Therefore, while Bitcoin is limited, other cryptocurrencies may meet the additional demand. The fact that Bitcoin is limited also means it will always have value. Governments cannot start minting currencies to compete against cryptocurrencies because the national currencies will depreciate.

Bitcoin is Money, But More 

Many people still argue whether Bitcoin and other cryptocurrencies are money. For a start, money serves three primary purposes. It is a store of value. Bitcoin meets this criterion as you can buy Bitcoin today and sell it at a profit later. Additionally, money acts as a means of payment. Bitcoin also serves the same purpose as this article has explained.

Finally, money is an accounting unit, meaning it is countable, divisible, and fungible. Bitcoin is countable as you can count the number of coins you have. It is also divisible and fungible because it is interchangeable with other cryptocurrencies and fiat money.

The implication of Bitcoin being money is that it has the power to replace national currencies. If you can use Bitcoin just like the US dollar, nothing stops you from using the former. But Bitcoin is more than just money.

Bitcoin is also a digital asset which makes it even more convenient. You can invest in Bitcoin as an asset, just like stock and bonds. With the value of Bitcoin as an asset exceeding that of national currencies by far, many people would prefer it over the national currency. Some entities now use Bitcoin as a hedge against inflation.

Talking of Bitcoin as a digital asset, anyone can start trading Bitcoin today.

Cashless Society

Finally, Bitcoin is an ideal type of cashless alternative to physical money. Most national currencies are still in the physical format as bank notes or coins. But we are increasingly becoming a cashless society. People prefer to use and have money in digital or e-money. And this puts pressure on some governments to introduce digital versions of their national currencies.

Take Away

Bitcoin is affecting national currencies in a big way. It is replacing the national currencies in transactions and putting pressure on governments to reconsider paper-based currencies. Maybe a time will come when Bitcoin and other cryptocurrencies will render national currencies obsolete. 

 

 

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