Bitcoin is neither a Threat nor Stable, Belgium Central Bank Governor said

Nishanth Shetty

Nishanth Shetty

December 25, 2017 9:45 am

Bitcoin is neither a Threat nor Stable, Belgium Central Bank Governor said | Coindelite News
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Bitcoin Price Analysis

In the beginning of this week, the National Bank of Belgium governor Jan Smets told that Bitcoin is not a threat to central banks since it is not stable.

Smets said:

“It’s not stable like the euro, creating blockchain-based digital cash could diminish our limitation to drop interest rates below zero.”

The Defective Argument:

Smets also explained that the bitcoin cannot be used or believed as a currency, because of its lack of a central entity and authorities managing the network. he mentioned that most of the investors in the bitcoin and cryptocurrency markets are gambling on the price trend of the cryptocurrencies. The risk of investing in bitcoin is low at the moment but it can be increased rapidly in the short-term.

Smets said in an interview with the Belgium news VRT:

“Let’s stop calling bitcoin a currency. Unlike the euro, bitcoin is not guaranteed by a central bank or government as a  means of payment so bitcoin is not a currency. Even if there are small risks for investing in bitcoin at the moment, there are potential consequences for financial stability.” (Translated to english)

According to Smets, it is very difficult to trust bitcoin as a currency.

Anyhow, bitcoin is designed particularly for operating as a trustless financial system and network. The whole purpose of bitcoin and its greatest benefit over other stores of value and currencies is that within its network, users can send and receive payments in a decentralized and peer-to-peer system, reducing the necessity of trust-based relationship, intermediaries, and third-party service providers.

Fiat currencies or government-issued currencies are also less stable than the cryptocurrencies such as bitcoin and other assets such as gold because of their inflationary nature. A fiat currency such as euro is manipulated by its central bank, which governs the circulation and supply of the currency.

Few Central Banks understood Banks

In the beginning of this year, the Bank of Finland released a research paper called “Monopoly without a monopolist: An Economic analysis of the bitcoin payment system,” with the purpose of describing bitcoin’s trustless and decentralized system.

 Bank of Finland’s research described:

“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power.”

The research also described:

“Bitcoin’s design as an economic system is revolutionary and therefore would merit an economist’s attention and scrutiny even if it had not been functional. Its apparent functionality and usefulness should further encourage economists to study this marvelous structure.”

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