“The analysis shows that the concept of digital currency is a fallacy.”
Although digital currency is synonymous with the term cryptocurrency, a paper published by the Bank of Finland and written by one of the consultants argues that cryptocurrency is not a true form of currency.
Aleksi Grym, a digital adviser to the Finnish central bank, said that the cryptocurrency “is not a currency at all, but an accounting system that does not have assets.”
He believes that “such a huge illusion” stems from “the concept of money has always been difficult to understand” and the “confusing terminology” in the original white paper by Satoshi Nakamoto, the nickname creator of Bitcoin.
Returning to the true function of Bitcoin, Grym likens the way Bitcoin works to the operation of traditional banks. First, in terms of bitcoin, the accountant of a traditional bank is similar to a miner. Second, the centralized ledger held by the bank to record account balances and transactions is similar to the Bitcoin blockchain.
As Grym said: “The only difference between a cryptocurrency system and a traditional ledger system is that in a cryptocurrency system, the ledgers are distributed across the computer network, while the traditional banks keep the ledgers in a centralized computer system. However, there is no practical difference between the two.”
He continues to add: “In essence, money is an account unit.” Therefore, although cryptocurrency can be used as an excellent “financial record keeping device equivalent to a book”, it will not replace the existing one. The form of money will not become a single currency form without the existence of institutional support.
Whether the Finnish bank agrees that Grym may not be the focus; as early as 2014, the Finnish central bank classified Bitcoin as a commodity rather than a currency.
The topic remains one of the agency’s interests, and has published several research papers on various aspects of cryptocurrency and blockchain.