Is Bitcoin Really Real Money?

Blockchain, Technology, Smart, Bitcoin, Money

Image Source: Pixabay

The movement to make Bitcoin into a de facto form of money has taken a step forward when Elon Musk declared that he would be purchasing over a billion BTC. Some are claiming that Musk did this to pump up an alternative asset because Tesla stock is overpriced and may fall hard soon. But who knows? Anyway, although BTC fell today, it has reached dramatic new highs well over $40,000, with various people calling for it to go to $100,000. Many respectable financial advisers seem to be changing their tune, shifting to maybe one should hold a percent or two of BTC along with gold in the non-income-earning part of their portfolios. Gold has remained flat just above $1800, and BTC is the “new gold.  But is it (or any other cryptocurrency) really real money? That is the ontological question of money.

So what is the ontological nature of money? We know there are debates over which of the standard textbook functions is the most important, with use as a means of exchange, a unit of account, and a store of value on the standard list. Some emphasize one over another. MMT advocates emphasize the unit of account function, especially when that unit of account is used to pay taxes. In that view this is the ontological foundation is the declaration by a government that something must be used to pay taxes, with this also resolving the epistemological issue assuming the government has sufficient existing credibility and communications skills as well as enforcement capability to enforce making its citizens actually pay their taxes using the established form of money.

As of now no government mandates taxes be paid in BTC, any more than that former official form of money, gold, is so mandated. We do see gold being held in large amounts by many central banks, with them even occasionally using it to make transfers between each other (and XRP is used by many commercial banks to carry out interbank transactions), but nobody uses any cryptocurrency or gold to pay taxes. Currently, taxes are all paid in pure fiat currencies backed only by the word of the governments involved.

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