The Czech National Bank has outlined its attitude to bitcoin and cryptocurrencies on its website, arguing that banks have no reason to fear either.
In the online document, the central bank addresses the popularity of bitcoin in the Czech Republic and its capital Prague, discusses whether cryptocurrency poses a threat to the traditional banking system, and argues that fiat currencies comprise better currencies than bitcoin due to price stability.
Under the heading ‘Don’t be afraid of bitcoin’, the document aims to address what are commonly regarded as the potential threats that bitcoin and cryptocurrency may pose to existing monetary systems. It opens by stating that “Prague is home to a strong community of cryptocurrency supporters and users,” then immediately moves to “questions regarding whether institutions such as the Czech National Bank should be afraid of bitcoin…. and of their power to marginalise traditional money.”
The bank concludes that there “is no reason for banks to fear” bitcoin and cryptocurrency. Virtual currency adoption is described as “negligible in its size and scope” and “electronic transactions using bitcoin worldwide amount to only 16% of the electronic transactions conducted in the Czech koruna (CZK), a currency used by just 10.5m people.”
A ‘good currency’
The article proceeds to describe the limitations of bitcoin, which the authors suggest does not comprise a suitable mainstream money commodity due to its “constantly changing price.” A “good currency” by contrast offers a stable purchasing power, while bitcoin is “inherently volatile” owing to its fixed supply.
The authors conclude that bitcoin represents “the antithesis of [the Czech] elastic money system, which is based on the principle that to keep the purchasing power of money relatively constant the amount of money has to change flexibly over time.”
Price stability is regarded as “the most beneficial feature of money in its present form”, with the bank suggesting that “there is no reason to fear that our existing monetary system will be replaced by a fixed-money alternative.”
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