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The Czech National Bank claimed that cryptocurrencies like Bitcoin do not pose a threat to the conventional banking system.
The Czech National Bank claimed that cryptocurrencies like Bitcoin do not pose a threat to the conventional banking system. A statement posted by the bank entitled “Don’t be afraid of Bitcoin,” argues that fiat currencies are still most suitable for commerce. The bank reasons that fiat currencies are more useful due to price stability, but contends that Bitcoin is not a bad thing and does not threaten the banking system.
The statement aims to address the popularity of Bitcoin in Prague and the entire Czech Republic. The document cites the high number of digital currency users and supporters in Prague but insists that Bitcoin cannot replace or marginalize traditional monetary systems.
The bank also says that the adoption of virtual currencies in the country is “negligible in its size and scope” and that “electronic transactions using Bitcoin worldwide amount to only 16 percent of the electronic transactions conducted in the Czech koruna.”
The bank explains that one basic problem with the use of Bitcoin is its constantly changing purchasing power. This volatility makes the currency much less useful as a means for paying and settling transactions.
According to the bank, price stability is the most beneficial feature of money in its present form. To maintain price stability and to keep the purchasing power of money relatively constant, the money supply must be able to grow and shrink as needed.
The bank also explains why Bitcoin is not a good mainstream money commodity. It claims that the digital currency’s constantly changing price will result in an unstable purchasing power. It concludes by claiming that the existing monetary system will not be taken over by any fixed-supply currency, such as Bitcoin.
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