Great Illusion of Cryptocurrencies: Bank On Finland’s “Fallacy” Attack Report Recap
Bank On Finland’s Recent Report Is An Attack On Digital Currency
A recent report published by Bank of Finland titled “The great illusion of digital currencies” attempts to prove that the concept of a digital currency is a “fallacy.” The paper is penned by Aleksi Grym, Adviser on Digitalization and Head of the Digital Central Bank and aims to explain how cryptocurrencies’ fundamental nature “shows how poorly understood the concept of money itself still is today” and how the Internet and social media have “muddled our sense of fact and fiction.”
Abstract Of The Paper
This paper is an analysis of digital currencies, including cryptocurrencies, and their potential as monetary instruments. The analysis shows that the concept of a digital currency is a fallacy. Currency, in the form of coins and banknotes, can be viewed as a physical representation of a monetary unit of account. Currency cannot be digitised, as this would inevitably mean creating a financial record keeping system based on accounts. Cryptocurrencies are not currencies at all but accounting systems for non-existent assets.
Central bank digital currency would practically mean bank accounts at the central bank. Whether the general public should have access to such accounts, and whether monetary transactions should be allowed to be made anonymously or privately, are questions of policy and unrelated to cryptocurrencies or their underlying technology.
Aleksi Grym’s Opinions
Grym said that cryptocurrencies are not actual currencies but instead “accounting systems for non-existent assets.” He argues that digital ledger technologies, such as blockchain, are actually identical to other record keeping systems, but that their application for crypto is “unrelated to the fundamental characteristics of money:”
The article pointed to a number several research studies done on Bitcoin (BTC) and cryptocurrencies with negative interpretations on crypto as either a speculative tool or a bubble whose “fundamental value is zero.” Grym also turns his nose on the idea of a central bank issued digital currency, saying that it would “practically mean bank accounts at the central bank.”
Grym repeatedly emphasized that the concept of money has changed over time, but that money is often described as operating as a unit of exchange and having a store of value and a unit of account. He even noted that money, presumably referring to crypto, is not generated “out of thin air,” but originates from liquidity transformation.
According to the commentary, the primary incentive for purchasing cryptocurrencies are either for illicit activities, generating a sense of community, security against “real or imagined” state oppression, and the excitement of trading. Grym then compared buying Bitcoin to the “intangible value” for some customers that buy “toys, fashion, art, club memberships, or firearms.”