The Bank of Finland released a paper called “The Great Illusion of Cryptocurrencies,” and has called a digital currency as “fallacy.” The paper was written by Aleksi Grym, the adviser on digitalization and head of the digital central bank process in the financial stability and statistics department.
The paper is an analysis of cryptocurrency and its potential. The analysis concludes that the cryptocurrency is a fallacy. According to the paper, money in the form of coins and banknotes, can be called as a physical representation of a monetary unit of account. Money cannot be digitised, as this would inevitably mean creating a financial record keeping system based on accounts. The Bank of Finland is the central bank of Finland. It is the fourth oldest central bank in the world.
The paper states that
“Cryptocurrencies are not currencies at all but accounting systems for non-existent assets. Central bank digital currency would practically mean bank accounts at the central bank. Whether the general public should have access to such accounts, and whether monetary transactions should be allowed to be made anonymously or privately, are questions of policy and unrelated to cryptocurrencies or their underlying technology”
According to Aleksi Grym, Bitcoin is used for criminal activity. People are drawn to bitcoin because of the thrill of trading. Because these can be genuine satisfiable needs, it would not be entirely accurate to say bitcoin doesn’t have intrinsic value. It does not yield any return in itself, any hopes of financial gains are swinging on the continuing rise in its market price. It is clear that such an indefinite rise is not possible, as it would require an ever increasing number of new buyers entering the market.
He further said that
“For all intents and purposes, that ledger is a centralised ledger. The fact that there are multiple synchronised copies of it, distributed across a network, is irrelevant, as each one has the same data.”
The digital currency is turning into real money is based on false perception that currency could exist in a single form without institutional backing. In reality, however, currency exists as both coins and banknotes, and has circulated alongside various forms of scriptural money throughout history.
He also concluded that
“Contrary to common perception, cryptocurrencies do not enable direct peer-to-peer transfers without intermediaries. Cryptocurrency systems use intermediaries, so called miners, who maintain a ledger. The fact that miners are unidentified and randomly selected for each transaction does not mean intermediaries are not used. Cryptocurrencies, therefore, are essentially accounting systems for non-existent assets”
Replacing coins with a digital version does not mean other forms of money would go out of existence. What is more, currency can be seen as just another form of scriptural money, a kind of financial record-keeping device comparable to an account book. Money, at its essence, is a unit of account.