Should Bitcoins Be Classified as Money?

The launch of Bitcoin in 2009 brought in a new age of digital currencies. At present, there are over a thousand cryptocurrencies present. Cryptocurrencies are entirely virtual or digital and have no physical existence. Any public or government authorities do not control them. Digital currency differs from standard regular currencies as normal currencies can be held physically and controlled by public or government authorities. So, the main question which arises is whether bitcoin should be allowed to be used instead of physical currencies. The invention of currency made the trading of goods more accessible and solved the problems present in the barter system. Money should be easily divisible, stable, and durable. To invest in digital currencies, you can visit nftrobots.org

Many lawmakers and regulators have raised questions on whether digital currency and, more importantly, Bitcoin be classified as legal money. Many opposing views have been made concerning the same. As Bitcoin is not regulated, many lawmakers oppose making Bitcoin a legal currency. There are many rules and regulations present concerning the transfer of the legal, physical currencies, which are not present in the case of Bitcoin.

Many countries have allowed the use of Bitcoin as the legal tender, including the USA. However, there are still many countries that have restricted possession or transfer of cryptocurrencies, like China. Furthermore, many countries have not made their stand clear regarding bitcoins, like India. Therefore, this becomes a limitation for Bitcoin as it is only used in countries that have accepted Bitcoin as a legal currency.

Should Bitcoins Be Classified as Money?

Some economics have debated that for a currency to function as money should have these:

Three functions/ characteristics:

1. It can be used as a medium of exchange

2. A unit of account

3. Store of value

So, according to economists like Hazlett and Luther, Bitcoin fulfils all these characteristics or functions, so it should be considered money. While some economists like Yermack have contended that all people do not accept Bitcoin, it cannot be considered a complete medium of exchange, so therefore not be considered money.

The most crucial function of money is its acceptance as a medium of exchange. As more and more companies are starting to accept payment in Bitcoin, the gap between money and digital money is getting narrowed. Bitcoin is easily divisible and can be securely stored. So the only debatable aspect of Bitcoin is whether its value is stable. The issue with accepting Bitcoin as legal money is that its value keeps changing by the second, so agreeing becomes difficult.

People have started accepting Bitcoin as money because

1. It can yield interest.

2. Hard to steal

3. Easy to transfer

4. Easy to store

5. Its value has appreciated in the past

Unlike money, whose value depreciates with time, Bitcoin has appreciated in the past. The appreciating value of Bitcoin has given it an upper hand over money. As all good things have some imperfections, Bitcoin also has some disadvantages over money:

1. It is riskier

2. Not regulated by the government

3. Does not have a stable value

4. Not available in all countries

Examples of some companies which have started accepting bitcoins as payments are MasterCard, Microsoft, AXA Insurance, Starbucks, Tesla, Amazon, Paypal, Visa, Coca-Cola, Expedia, Lush, LOT Polish Airlines, Sotheby’s, AirBaltic, Pavilion Hotels and Restaurant. Some countries which have made Bitcoin legal are the United States, the European Union, Canada, Australia, El Salvador, Denmark, France, Germany, Iceland, Japan, Mexico, Spain, and United Kingdom.

Some countries which have restricted the use of cryptocurrencies are China, Bangladesh, Algeria, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia. While India has not banned cryptocurrencies, it has clarified that Bitcoin will not be accepted as a currency. India has taken this decision as data on cryptocurrency transactions is not available. In addition, India has also made its tax regulations clear regarding the trading of bitcoin.

There is no clear answer whether Bitcoin can be used as legal money, but with recent trends, the question is not whether Bitcoin can be used as legal money but when Bitcoin will be used as legal money. As acceptance of Bitcoin increases, it will soon be considered legal money worldwide. Henceforth, the currency is accurate for selective investment. The divergence in the currency is easy to go with for a long time.

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An NIT Rourkela Graduate in CS, Blogger, Android Geek, and a Tennis Fanatic. I have been writing about Android OS for Last 8 years.

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