Is Bitcoin Money?

Photo by zcopley / CC BY-SA

Image: Photo by zcopley / CC BY-SA

I recently attended two discussions of the Amsterdam Bitcoin community about the question whether Bitcoin is money. A commercial Bitcoin company set the community in motion after launching an effort to overturn a recent court ruling that Bitcoin was not money, the ‘Bitcoin is Geld’ initiative (english).

As the founder of a Bitcoin company myself, eCash.io, I have been in touch with the Dutch central bank, De Nederlandsche Bank (DNB) about a money transmitter license. The reply we received stated that because DNB did not regard Bitcoin as money our activities fell outside of the scope of financial authorities and, therefore, we did not need a license to operate our Bitcoin payment service. On the condition that we do not keep customers’ fiat funds for more than 5 days.

When something is money

The first gathering of people met last tuesday at the Beurs van Berlage workplace. The speaker of interest was professor Jan Bergstra of the University of Amsterdam. Bergstra explain, in somewhat confusing terms, that “[a financial asset] is money when a central bank puts it on their balance sheet and distributes the asset to their end users”. He went on to explain that, in order to be money, Bitcoin required no changes of its technology. Whether something is money is simply decided by a higher financial authority, at least within the context of the European Union.

In conclusion: in Europe Bitcoin is not money until the European Central Bank says it is. We are expecting a ruling or directive from the ECB sometime in about 2 years from now. In the meantime, Bitcoin continues to operate in the Wild Wild Web. Bitcoin is only 5 years old and we are only just beginning to figure out how Bitcoin should be treated and regulated, which will take another 5 years.

Is Bitcoin money?

Then yesterday, Wednesday, a larger community of about 100 Dutch Bitcoiners convened at Pakhuis de Zwijger for the monthly Bitcoin Wednesday. It is clear that the ‘Bitcoin is money’ discussion divides the community. On the one hand there appears to be a majority of people who believe that Bitcoin is a means of payment, a payment system, rather than a currency on par with EUR or USD. An apparent minority thinks BItcoin is money.

A lawyer working for the Bitcoin is money case stubbornly defended his (or his client’s) point of view. But he could not clearly answer a clever question from the audience: if we stamped gold coins and used them to pay for things within the Bitcoin community, would gold then suddenly also be money? The lawyer replied that “gold is not a widely accepted means of payment”. Which, arguably, holds true for Bitcoin as well.

The greatest criticism from the audience was that nobody really understood the motivation behind the court appeal. The lawyers appeared to ask for community support in their case, so they could convince the judge that, according to the Bitcoin community, Bitcoin should be or ought to be money. However, this support was entirely absent, even from the pro Bitcoin is money camp. Nobody in the community wanted their community used for the sake of a third party’s legal stake.

It’s about the community

It was an exciting and at times emotional meetup. This is a crowd of intelligent, educated technologist, economists and philosophers. Many took to the floor to speak up. During the break many new ideas were discussed. People from all layers of society are working on new applications for decentralized technology: peer to peer health insurance, democratic money supply, decentralized identity and the web of trust, and much more.

Ultimately, one thing is very clear: the Bitcoin community cares a lot about Bitcoin. And many of us would prefer governments and central authorities stay away from it. Bitcoin’s decentralized technology will be the great revolution of our time. We just need to channel our efforts.

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Is Bitcoin Money? by Mathijs Koenraadt is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.