Bitcoin is not money, the deputy director of the Dutch Payments Association has declared.
Comparing the digital currency to tulip bulbs, which famously rocketed in price during the ‘Tulip Mania’ bubble of the early 1600s, Gijs Boudewijn dismissed suggestions that bitcoin could be currency:
“Bitcoin is not a claim and therefore not money … If you and I agree to pay each other in tulip bulbs then we have established a private currency and the same applies to bitcoin.”
Bitcoin is a limited prospect
Bitcoin has two almost distinct personalities. The first is the political revolutionary, destined to disempower government. The second is more prosaic; bitcoin is simply a better way of transferring money, a technology easily co-opted by a banking system seen by some bitcoiners as the enemy.
For the majority of society, Boudewijn argued, bitcoin will be the latter, a useful technology for specific transactions and no more than that:
“For specific purposes [bitcoin] is convenient. But eventually – and that's why you have exchanges – you want to redeem them for something that's state-backed, and that is central bank money … The functionality and the technology are extremely interesting. The question is, do you want that in a cryptocurrency or can you apply that with the euro as well?”
The comments come weeks after the Dutch Minister for Justice and Security said bitcoin would not be banned, and echo a recent UBS report that suggests that banks can adopt “a bitcoin-like technology” to create a new foundation for payment services that would prop up, instead of pull down, the existing banking system.
Boudewijn said he doubts that bitcoin can become a widely-used currency, and argued that the need for government to provide confidence in a currency means bitcoin would be a limited prospect:
“The underlying fundamental discussion is what the functions are of money in society. In the end it is just a social convention that we agree on together in that we have one legal tender here, and we call it the euro. And a central authority is supervising that. They issue it and guarantee that if [a bank] goes bankrupt … savers get their money back.”
Banks need to get used to bitcoin
Of course, one of the core political arguments behind bitcoin is that the confidence provided by the government isn’t good enough.
The banking crash in 2008 and subsequent economic crisis have shown governments’ powerlessness and even complicity in failing to protect consumers, some argue, pointing to Cyprus’ 2013 levy of up to 10% on all savings accounts.
That event was attributed to a spike in popularity of bitcoin, as people looked to the digital currency as a way of controlling their money and keeping it beyond the reach of government.
In the same interview, Chris Buijink, Chairman of the Dutch Association of Banks (NVB), somewhat conceded the point, saying, “Well, we do everything we can to avoid this from happening again, and that’s the reason for what we’re now discussing in Europe around the bank union.”
Buijink admitted that banks need to start getting used to bitcoin:
“If a concept proves to be good, then we will hear more about it the coming years, and then structures, who are not used to it, will have to think about it and adjust themselves.”
Both Boudewijn’s and Buijink’s comments are not wholly unexpected. Across the world it is increasingly clear that governments and regulators are sceptical – perhaps doubtful for reasons of self-interested – about the idea that digital currencies could replace fiat currency entirely. At the same time they’re waking up to the opportunities offered by the bitcoin technology.
The problem, says Boudewijn, is that payments systems will never be able to move as quickly as a rapidly emerging new technology needs it to.
“In niches like bitcoin you can innovate rapidly, but if you’re in the mainstream market – in a two-sided market where customers are with different banks and you’re in a network industry – it is very difficult. It also ensures a certain slow pace in innovation because it has to work everywhere. That makes it difficult, but that’s inherent to the traditional payment market. And there we can learn from the [digital currencies] of this world.”