Bitcoin in the Headlines: Macroeconomics Debated

Yessi Bello Perez
Feb 27, 2015 at 18:40 UTC
Updated Mar 2, 2015 at 11:52 UTC
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Being a controversial technology, bitcoin has once again managed to captivate the media’s attention over the last few days.

Having seemingly recovered from the bad news fatigue that riddled the headlines last week, the mainstream media seems to have engaged in the bitcoin debate, trying to find ways to tie the technology to larger trends and events.

On one side of the battle field, the media believes that the digital currency could potentially be adopted by countries wanting to mitigate their national debt, or by central authorities who wish to keep up with the times by adopting it.

In contrast, the naysayers, argue that bitcoin will never ever replace fiat – a currency so highly guarded by governments.

So, what’s the real deal?

CoinDesk takes a look at the week’s headlines from across the world.

Bitcoin as ‘digital gold’

The week’s coverage started off with Paul Mason’s Guardian article exploring whether a bitcoin-style virtual currency could potentially solve the Greek financial crisis.

Greece, crisis and bitcoin all in one sentence – sparks flew.

Mason said that the Greek crisis could potentially lead the way for “one of the most audacious pieces of lateral thinking ever … a parallel digital currency, issued by the Greek government”.

In case you are wondering, Greece owes a “mere” €317bn, otherwise translated as 175% of its GDP.

This proposed digital currency would be modeled on bitcoin, but with one crucial difference.

Mason said:

“Bitcoin is an audacious attempt to create money beyond the control of any state. It is a digital currency, in the form of a limited number of tokens.”

He went on to explain that the currency is championed by people who would like to see the return of the gold standard – a system that obliges states to limit the amount of national currency issued, supported by money fundamentalists.

Then things got really interesting, with Mason concluding:

“Bitcoin’s aim is to function as digital gold.”

The Varoufakis effect

But, why would the Greek government ever want to issue a digital currency alongside its centralised one?

Cue Yanis Varoufakis, who published a blog post a year ago, discussing the possibility that Greece could create a parallel digital currency, using bitcoin’s digital security and transparency, doing the exact opposite of what the money fundamentalists wanted.

Varoufakis predicted the currency would provide: “a source of liquidity for the governments that is outside the bond markets, which does not involve the banks and which lies outside any of the restrictions imposed by Brussels or the various troikas”.

Forbes’ Tim Worstall said that “Greece simply would not allow to do this.”

Despite describing Mason’s piece as “interesting”, Worstall insisted that “The ECB would cut off the Greek banks immediately and that would be that, game over”.

The Forbes contributor continued to say that Varoufakis’ initial analysis was correct, but that he was not talking about the fiscal constraints upon the Greek government.

He went on to say:

“The conclusion to be drawn from what [Varoufakis] is saying is that Greece should leave the euro. Which, of course, is also true but then we’ve been saying that for a long time.”

Whether this is true or not, only time will tell.

The award goes to the FT Alphaville for providing the most amusing – and perhaps sarcastic – of headlines: “Greek funny money: no thanks.”

The publication has dismissed the digital currency’s potential in the past, but this time, David Keohane, puts it simply, saying that “it’s a very silly idea”.

Bitcoin’s ‘legitimate’ value

Forbes’ Bill Conerly shook things up a bit, discussing the potential benefits that bitcoin adoption would bring to mainstream merchants.

The Forbes’ contributor said that bitcoin was a better way to do transactions. “Forget about bitcoin as an investment vehicle, or bitcoin as a way to end the Federal Reserve.”

He added:

“Its benefit to business comes from payments.”

Perhaps in an attempt to reassure the skeptics, Conerly said that “the merchant taking bitcoin is not going to make headlines for customer data being hacked”. He explained that “the only information the merchant has are codes with each individual transaction”.

The contributor concluded that bitcoin “is not for everyone”, but it offers “legitimate value to many companies”.

Bank of England explores bitcoin

The Bank of England made headlines this week after it published One Bank Research Agenda, a paper  which looks into the possibility of the authority issuing its own digital currency based on bitcoin technology.

A google news search brought up a total 85 articles.

However, the price of bitcoin was perhaps unsurprisingly unaffected by the announcement.

The Telegraph ran a piece by Peter Spence, with “Bitcoin revolution could be the next internet, says Bank of England” as its headline, regurgitating the comparison between the digital currency and the Internet.

City AM also published an article, titled “Could the Bank of England one day embrace Bitcoin?”. Note the use of the word “embrace”

In her piece, Jessica Morris, issues a warning to bitcoin fanatics, concluding:

“The central bank would need a rationale for issuing a digital currency, as well as addressing the economic, technological and regulatory challenges of doing so.”

Jonathan O’Callaghan’s piece in the Daily Mail, led with “Is the Bank of England going to create its Bitcoin? Minting a digital currency could eradicate high street lenders”.

In his piece, O’Callaghan, notes that despite the Bank of England saying bitcoin “could become as common as modern banknotes”, the authority also warned “that there are a number of problems – and if consumers flocked to digital currencies, it might leave high street lenders devoid of customers”.

Perhaps an unlikely possibility, but one that O’Callaghan thought was worth highlighting.

Another month is drawing to an end and the lack of consensus among the media means that we are each left to draw our own conclusions about bitcoin’s potential – or lack thereof – to flourish in the “real” world.

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