Bitcoin is Not a Mode of Payment, It’s an Investment

Satoshi’s bitcoin was set out in the world as advancement from the traditional currency which meant that the digital currency would be fulfilling all the roles carried out by the paper/plastic money. However, a report by the United States think tank Congressional Research Service (CRS) claims that the bitcoin and other cryptocurrencies are being used as an investment tool rather than money for payments.

The topic of how cryptocurrencies are being generally used was a part of an investigation report which focused on the usage of cash in the United States. The report, dubbed “The Potential Decline of Cash Usage and Related Implications”, discusses the trend of reduction in the usage of paper money in the era of cards and digital money.

The report labels cash as “the once, but perhaps not future king” and suggests that payments made through contactless cards are increasing as compared to cash payments. A fact that doesn’t come as much of a surprise because credit/debit cards have been around for quite some time now and have cemented a stronghold in the financial ecosystem.

The report mentions that several businesses have long set conditions under which they would not accept cash. For example, certain businesses refuse to accept high-denomination bills. According to the most recent complete Federal Reserve Payment Study on non-cash payments, the number of traditional non-cash payments made in the U.S. totaled more than 144 billion transactions with a value of almost $178 trillion in 2015, which included payment via debit and credit cards.

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The report then addressed the newest form of currency- cryptocurrencies, analyzing public, private and even the ones issued by central banks, otherwise known as central bank digital currency (CBDC).

Researchers took bitcoin as the prime example in studying the usage of cryptocurrency and the conclusions weren’t in favor of the crypto, despite the fact that price data on bitcoin shows both the public interest and the demand for this cryptocurrency. According to the report, public interest and demand are poor indicators when it comes to how often the cryptocurrency is being used to purchase goods and services, or how often it is being used as money simply put. The report continues:

Certain analyses appear to show that digital currencies are not being widely used and accepted as payment for goods and services, but rather as investment vehicles.

The most common reason deduced by researchers as to why bitcoin isn’t being used as money is because of two factors: price volatility and scalability. Bitcoin has risen from the ashes of $3,150 in December 2018 to $8,900 earlier this week and while its resurgence has injected new energy in the cryptoverse, it simultaneously reinforces the notion that it is in fact highly volatile. The report read:

Cryptocurrencies can have significant value fluctuations within short periods of time; as a result, pricing goods and services in units of cryptocurrency would require frequent re-pricing and likely would cause confusion among buyers and sellers

Moreover, the report highlighted that presently the systems underlying cryptocurrencies are apparently not capable of processing the number of transactions that would be necessary for a widely adopted, global payment system.

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On the other side of the coin, analysis from software startup DataLight predicted that bitcoin can beat financial giants like Mastercard and Visa to claim the throne of payment systems. According to the report, if bitcoin’s current rate of network growth continues, it will beat out competition from market incumbents. It continued:

In just 10 years, bitcoin has managed to compete with the leaders of the payment system industry. Bitcoin’s development is occurring exponentially.

That being said, CSR didn’t blatantly rule out the potential behind the idea of a cash-less ecosystem. It went on to highlight the potential benefits of a reduced role of cash.

Efficient Payments

According to the report, the proponents of non-cash payment systems believe that the resources, labor and capital that go into the cash system like producing currency, stocking and maintaining ATMs, safely transporting cash, all contribute in rendering less efficient that a non-cash system.

READ ALSO: Even Bitcoin Creator Has Less Bitcoins Than Hackers

Reduced Crime

The report also mentions that the elimination of cash from societies could reduce the crime rate by making operating an illegal enterprise more difficult and certain crimes, such as robbery redundant. Criminals tend to conduct business via cash to avoid leaving a paper trail; a cashless system would also help in tracking them down.

Riddance from Monetary Policy Constraints

Per the report, another benefit from a macroeconomic perspective of a cashless society cited by economists would be the potential elimination of the practical inability of central banks to implement negative interest rates.

The future of bitcoin, cryptocurrency and payment system seems to be a never-ending argument that will stretch on until concrete evidence takes place of speculations.

READ ALSO: Mining Bitcoin Costed 61 Year Old a 4 Month Prison

Abeer Anwaar

Abeer holds a Bachelors degree in Media studies and covers blockchain startups for BlockPublisher. An optimist, excels in the art of the written word and swears by the joy of all things sweet. Contact the editor at


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