Last week, the National Bank of Belgium Governor Jan Smets said in an interview that Bitcoin does not pose a threat to the central bank because it is unstable.
Smets said:
“It's not as stable as the euro, and creating digital cash based on blockchain is not conducive to reducing interest rates to below zero.â€
There is a loophole in the argument
Smets further emphasizes that Bitcoin cannot be used and trusted as a currency because it lacks central entities and authorities to oversee the entire network. He also pointed out that most investors in the bitcoin and cryptocurrency markets are only speculating, so although the risk of investing in bitcoin is currently small, it may grow rapidly in the short term.
Smets said in an interview with the Belgian news media VRT.
"Don't call bitcoin money. It's different from the euro, not a means of payment guaranteed by the central bank or the government, so bitcoin is not a currency. Even if the risk of investing in bitcoin is now small, it may still be financially stable. Make an impact."
Smets believes that bitcoin is not as stable as the euro due to the lack of support from central entities and central banks. He stressed that it is difficult to trust Bitcoin as a currency.
However, Bitcoin is designed to operate as a trusted financial system and network. The full use of Bitcoin and its relative advantage over other value and currency storage is that within the Bitcoin network, users can send and receive payments in a decentralized and peer-to-peer (P2P) manner, eliminating trust-based relationships, Intermediaries and third-party service providers.
Legal currency or currency issued by the government is characterized by inflation and is therefore more unstable than cryptocurrencies (such as bitcoin) and other safe-haven assets (such as gold). Legal currency, such as the euro, is operated by the central bank, which manages the circulation and supply of these currencies.
Some central banks understand the advantages of Bitcoin
Earlier this year, the Central Bank of Finland published a research paper entitled "Monopoly without Monopolists: Economic Analysis of Bitcoin Payment Systems", whose sole goal is to describe the system of trustworthiness and decentralization of Bitcoin.
The paper writes:
“Bitcoin is a monopoly that operates through agreements rather than managing organizations. Usually, monopolies are realized by regulatory agencies that determine and adjust prices, products, and rules at their discretion. Monopolists are generally regulated to prevent or Reduce their abuse of power."
The Finnish central bank encouraged economists to study the structure of Bitcoin because it launched the first decentralized financial and payment system in the global financial market. Finnish bank researchers added:
"Bitcoin is revolutionary in its design as an economic system, so even if it doesn't work, it still deserves the attention and review of economists. Its outstanding features and usefulness should further encourage economists to study this wonderful structure."
Bitcoin poses a threat to central banks and authorities because it is the first value store and currency system that separates money from the state. It probably eliminates the most powerful government tools that monopolize the global monetary system.
This article only represents the author's personal opinion, does not represent the position of the blockchain pencil, does not constitute investment advice, the content is for reference only.
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