Bitcoins as Legal Tender
An Evaluation from an Economic Perspective
– in englischer Sprache –
Hamburg 2017, 96 Seiten
Until today Bitcoins are enjoying increasing popularity in the media and in reality. They are not regulated and only exist virtually. The maximum amount of Bitcoins in circulation is defined from the outset, so these Bitcoins are (in theory) inflation-proof. The exclusively digital nature of Bitcoins makes them divisible, so the restriction on the amount of coins in circulation does not conflict with its suitability as a global means of exchange. At the same time, transactions can be carried out rapidly, anonymously, worldwide and at virtually no cost. This all sounds positive and revolutionary.
At present, it is the high volatility that makes the system attractive to speculators and players of dubious origin. Nevertheless, the path to mainstream use is being smoothed out: an increasing number of goods and services can be procured. The “gold rush” on the internet persuaded venture capital companies and hedge funds to get on board a long time ago, and the first Bitcoin ATMs are being set up (coinatmradar 2017). Accordingly, a number of governments have taken an in-depth look at this subject, including the American Congress (NY, FS Department Title 23 - Part 200 2014), because problems are arising along the entire value creation chain in dealings with Bitcoins. The purpose of this study is therefore to answer the following question:
“Can Bitcoins be used as legal tender from an economic perspective?”
The study shows that the central characteristics of Bitcoins are anonymity and a lack of central control. For individual users and internet-savvy people, Bitcoins can certainly mirror the characteristics of money to some extent. This is not true for the majority of people, however. There are certainly stark differences in relation to volatility and stability of value, which suggest that Bitcoins fail because of this essential characteristic of legal tender. Nonetheless, Bitcoins clearly show that state-regulated currencies can have disadvantages as well.
While the future development of Bitcoins must be viewed critically, it can unarguably be stated that they have made an essential contribution to holding up government-regulated currencies to scrutiny.
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