In a recent opinion piece by Benoît Cœuré, member of the executive board of the European Central Bank, the discussion of Bitcoin centered around the coin's potential as the future of money.
The opinion was chiefly negative, stating that Bitcoin could not serve as money in its current state:
"Such cryptocurrencies are poor imitations of money. Almost nobody prices goods in Bitcoin, few use them for payments, and, as a store of value, they are no better than gambling in a casino. Policymakers are rightly worried about consumer and investor abuses, as well as illicit use."
Yet the analysis focuses on one aspect of cryptocurrencies - the possibility for instant, cashless payments. With more younger buyers easily accepting cashless payment venues, the fintech side of Bitcoin and crypto coins remains appealing.
"Yet, while bitcoin and its cousins are something of a mirage, they might be an early sign of change, just as Palm Pilots paved the way for today’s smartphones. Cash will not be king forever, even though it still rules in many parts of the world," wrote Cœuré.
The ECB is already working together with the Bank of International Settlements on the issue of central bank digital currencies. In the current system, only commercial banks have access to the centralized "digital funds" created by central banks. But Cœuré theoretically drew a scenario where central banks could directly inject commercial liquidity, by using direct digital money injected into the economy.
There is no knowing how this would affect the future of commercial banks. But the opinion piece still suggests that central banks have to remain, in order to control liquidity. And this remains the biggest difference between Bitcoin and fiat issued by the central bank.
Bitcoin's total supply remains fixed, and there is no policy to release or withdraw Bitcoin to boost or curb economic activity. But fiat is regularly increased to boost the economy, or restricted in cases of inflation. This is the pedal-and-brake function of a central bank.
Yet the Bitcoin network does well the work of a commercial bank, especially in the market for international payments. Paradoxically, while Cœuré claims few people pay in crypto coins, cross border shopping is much easier and safer with crypto payments.