Is Cryptocurrency Real Money? Brief Discussion on Major Issues Surrounding Debate

Ever since the inception of cryptocurrency, the question: "Is cryptocurrency real money?" can stir up more heated debate and confusion than all the rest of its internal operations, consensus mechanisms, and technical applications put together.

Many arguments have been submitted to support or to discredit cryptocurrency's validity as a bona fide form of modern money. The awareness of both sides of the coin will help each of us come up with their own answer to the question: "Do I believe cryptocurrency is real money?"

From the general public and institutional investors to the established members of Bank Royalty and Hedge Fund managers, the debate rages on.

The Cointelegraph discusses a few of the major issues surrounding the debate.

Pre-question first

Before we can address the issue of cryptocurrency being real money or not, we must define the term "money".

What is money?

Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context.

The invention of money turbo-boosted the advance of human civilization. It made the barter system obsolete and spawned a booming, cross-border trade system. This profound affect on the development of society as a whole is normally lost on all but a few individuals.

Let's face it. Most people take money for granted; ignorant of its origin, purpose and defining characteristics. In a fog of ignorant bliss, they blindly go about their daily lives only spending their time-honored, familiar money; not knowing that there are many types of digital currency being used now as a form of global money - and that's called cryptocurrency.

Furthermore, the general public seems oblivious to the greatest appeal of cryptocurrency: decentralization.

Decentralization allows cryptocurrency to give the individual more control and security over his digital money -  with much less influence by middle men - intermediary third parties like the omnipotent World Banking System, stock brokers, clearing houses - and the geopolitical requirements and limitations imposed by each nation's government.   

Money holds a personal meaning for each of us. For some, it is a convenient means to acquire or experience things that we want.

Others use money to avoid doing something they dislike or simply to save time. In essence, money is a handy container that safely holds economic power to be deployed in the future; hence the phrase:  "Time is money."

Still others equate money to power, security, affection, friendship and love - special treatment or privileges in private and public settings, inheritances, loans to friends and relatives, dowries, etc.

The huge psycho-social impact that money has on behavior, both on groups of people at the macro level as well as individuals at the personal level, is a very broad and fascinating subject.

Yet, we must stay on target and focus on our objective: Being able to make an informed, personal judgment on whether cryptocurrency is real money or not.

Like most people, I grew up thinking money was simply those neat, pretty coins or pieces of paper with cool designs that I could buy stuff with. The first money I ever spent was from the United States. Later, while visiting another country, I noticed that - like stamps for mailing letters - most other countries require their own coins and paper money for making local purchases.

That meant, with very few exceptions - like East Timor, Ecuador and Micronesia - who still accept US dollars, that I couldn't count on spending my money in other countries; which necessitated a trip to a Money Exchanger to transform my useless money into the local, spendable money.

Of course, the transformation process is not free. You have to pay a "conversion fee" ending up with less value of your native money relative to the money that is paid to local job workers. Simply stated, if you were a citizen of that foreign country and had a job, you most likely were paid in the local currency; therefore, you had no need to convert it and not pay the associated fees.

To make things even more costly, whether you exchange any unspent foreign money back into your homeland's money before departing the host country or back at home, the original amount of money is further diminished. But hey, what else could you do while being temporarily abroad?

From then until now, a constant has been that every middleman takes his cut.

More and more people forgo carrying around coins and dollar bills. They use a debit or credit card to pay for items in stores, online, and at restaurants. Intuitively, they still know that they're actually spending money from their bank accounts or borrowing money from a credit card company. Additionally, they limit their thinking of the money spent or held within their accounts strictly in terms of their native money.

The use of electronic payment systems has made buying goods and services in foreign countries much easier. It reduces the need to visit the Money Exchanger. But make no mistake. You are still buying the local currency at a premium when you use your debit or credit card abroad. The bank or credit card company charge you a "foreign currency fee" or "international charge" along with its usual monthly interest on your account balances.

Criterion for money

Whether it be grains of barley, spices, jewels, livestock, ancient Mesopotamian clay tablets, seashells of pre-colonized island nations, precious metal coins from the Roman Empire era, or the paper currency of today, all forms of money must meet some criterion for money.

The first five criteria of money are objective; and therefore, overwhelmingly agreed upon. The last two are very subjective and the primary cause for the ongoing battle between traditional, conventional, and progressive financio-economic mindsets.

First, we'll list the objective criteria. Then we'll discuss the two subjective ones that are the crux for the controversy over the characteristics of real money.

The following five objective criteria are simple to comprehend, almost self-explanatory.

Medium of exchange

The number one utility of money is as a medium of exchange. It became the standard solution for comparing the values of unlike items. In the barter system, traders haggled over how many chickens were worth a goat or a cow, how many loaves of bread were worth a bottle of wine, or how many kilograms of grain were worth a blacksmith's anvil.

Money also solved another major hassle of the barter system called the "coincidence of wants".

Before money, people had to worry about finding others who wanted the things they had to trade, representing a frustrating dilemma for many barterers. This mutually reciprocal trade scenario, meaning: you and another person wanted or needed what the other possessed and was willing to trade with you, was inconvenient and often elusive.  

If they could not find others with a mutually reciprocal want or need for a trade, they were out of luck. In desperation, they were compelled to navigate a labyrinth of less profitable, intermediary trades to finally get what they initially wanted.


Money must be portable. Instead of physically bringing livestock to the market to exchange for something else, people could now exchange lightweight, highly portable money as a proxy for the value of the exchanged items. This is a no-brainer. Can you imagine having to lead your cows around or transport sacks of wheat to use as money?

Unit of account

The term “unit of account” means that within the operating environment of money, one unit of measure is of equal value to another unit of the same measure - one dollar has the same value as another dollar. This standardized value per unit enables efficient accounting and is absolutely vital for effective trade.

That’s why the US Secret Service spends significant time and man hours battling the counterfeit organizations of the world. In March 2015, the US Secret Service estimated that 0.25 percent of the $3.4 Bln - $1.36 tln circulating around the globe were most likely counterfeit.

Counterfeiting money is not new. A counterfeiter was called a “coiner” in the 1700’s of England. Counterfeiting was considered high treason. A convicted coiner named Catherine Murphy was hung to death in 1798. Lucky for her, the Treason Act of 1790 abolished burning at the stake.

Faked British currency found in Alpine Lake - near Austria - shows that Nazis counterfeited British currency during WWII. In the late 1930’s, a New Yorker named Edward Mueller, portrayed in the 1950 “Mister 880” movie, spent his counterfeit dollar bills throughout the city for over 10 years before the Secret Service finally caught up with him.

In 2015, Itzhak Loz and Ronen Fakiro were caught by the US Secret Service after counterfeiting over $86 mln of “close to perfect $100 bills”.

Clearly, since the unit of account aspect of money is crucial for fair commerce and the ever-present threat of compromise exists, the war on counterfeiting is a very serious, ongoing battle.


Any form of money has to be durable enough to withstand the rigors of normal trade - countless exchanges from one person to another, transport in bags, pockets, or treasure chests, erosion from time and the elements, and so on. Otherwise, it would be abandoned quickly for a more durable iteration. Part of the appeal of coins was their superior durability.

On the other hand, desperate times call for desperate measures and will often negate the requirement for durability.

In post WWII Germany, the government wanted to increase the money supply so badly that supplies of normal currency printing paper were soon exhausted. Printers had to use whatever was available; including flimsy, toilet tissue-thin paper and scrap wood. Today, paper currency uses hybrid materials of paper and fabric to increase durability.


The word “fungible” - which has nothing to do with “fungus” or its plural form “fungi” - is derived from the Latin verb “fungi”, meaning “to perform or serve in place of”. In the legal and commodity worlds, the word “fungible” is tossed about frequently.

To say something is “fungible” is to say that, implicitly or explicitly, one item of the same nature is completely exchangeable with another of like kind. In other words, where the US dollar is used as currency, one genuine dollar can be exchanged for another genuine dollar with no profit or loss.

Many people confuse unit of account and fungibility as being the same, but they are not. Unit of account deals with unit measure and value equality, whereas fungibility is concerned with replaceability.

Of course, a counterfeit dollar compared to an authentic dollar neither meets the unit of account, nor fungibility criterion. A legal tender, taped-together, aged dollar bill compared to a freshly minted, crisp legal tender dollar bill does - wherever the dollar can be spent.

The key to fungibility is if a particular form of money is used within its operating environment or not. If a currency is outside of its operating environment - a country where it is not accepted for purchases, for instance - it is not fungible, irrespective of meeting the unit of account criteria. The only way to make it fungible is by converting it to a third party money that is accepted by all parties concerned - effectively making the third party’s money the unit of account and making the other two semi-fungible.

That’s how the Medici family of Italy in the Renaissance made a fortune in currency exchange. They figured out a way to get around the usury laws.

What is “usury”?

Usury is the practice of charging interest on “Christian to Christian” loans, and resulted in harsh punishments by the law. It was considered a major sin by the Catholic Church. In fact, in the book “Dante’s Inferno”, a special place in the seventh circle of Hell was reserved for usurers.

The only people allowed to charge interest on loans were Jews - and only on loans to Christians. Why?

They used a Biblical “loophole” in Deuteronomy. Chapter 23:20 states, “Unto a foregner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest...” - that meant that Jews could lend to non-Jews with interest, but could not lend and charge interest to another Jew (“brother”).

Then the Medici, formerly a family of thugs, came along and created what we now know as FOREX. With “interest” disguised as “commissions” and “discretion” - on foreign currency conversions, transactions and “advances” - another word for “loan” - the Medici became legitimate and amassed enormous wealth and power. Many of the Medici became royalty and Popes. Some historians believe that the Medici were, in great part, responsible for financing the Renaissance.

Another example of unit of account qualified, but not fungible?

Imagine you are a collector of different currencies as a hobby - much like stamp collectors. You decide that the only specimens in your collection will be the most pristine examples. Although you may agree that both pristine and worn, aged specimens of  genuine currency are the same unit of account when spent, they are not considered fungible to you. A crumpled, old dollar bill could not replace a gleaming, untarnished dollar bill within your collection.

Intrinsic value

In finance, intrinsic value refers to the value of a company, stock, currency or product determined through fundamental analysis without reference to its market value.

This criteria is highly subjective and bloated with a plethora of complicated financial formulas and economic theories which are never universally agreed upon, and can be interpreted in many ways.

Purists, especially gold and silver bugs - investors in gold and silver - do not consider anything but gold and silver as real money. Their argument stems from the fact that all currency is simply a “placeholder” for something of value, namely gold and silver  - much like a claim check given to a valet for your car isn’t actually your car, just a piece of paper that states you are the owner of the car.

They also cite Article I, Section 10 of the Constitution: “No State shall make anything but gold and silver Coin a Tender in Payment of Debts;” to support the claim that the Constitution says money should be gold or silver coin. In fact, Louisiana, Texas, and Utah have passed laws to use gold and silver as money - with many other states in the process of passing similar legislation.

Others debunk this philosophy, stating that “money” is never defined in the Constitution and the above Article I, section 10 refers only to individual States being prohibited from creating coinage or currency that is legal tender. Additionally, The Coinage Act of 1792 provided for the minting of lawful tender coins out of copper, gold and silver - making it clear that materials other than gold or silver were legally coined as money by Congress.

So, from post-revolutionary America up to this point, US money was gold and silver coinage, or certificates and currency normally backed by gold or silver.

Americans were assured that their currency was backed by gold or silver at any bank. However, the amount of gold behind each dollar slowly dwindled through the years and was further exacerbated by the Bretton Woods Agreement of 1944 - where the current US dollar was backed by only a fraction of the gold than the original US dollar; and the rest of the world’s currency was pegged to the dollar. This established a new global monetary system.

In 1971, President Nixon - amidst a plummeting dollar, rising gold values and more countries wanting their gold repatriated instead of holding US dollars - took the dollar off the gold standard altogether. All of a sudden, every other country did so too.

This currency now became “fiat” money - money not backed by gold, but by the authority - seal of approval (fiat) - and the trust of each sovereign nation’s government. Of course, this has spawned many counter-fiat groups - least of which were the early adopters of cryptocurrency.

The following is a cold hard fact - no fiat currency in world history has ever survived.

Every fiat currency had a beginning, middle, and end. Stated another way, no fiat currency ever created by man has enjoyed immortality. All had periods of adoption, popularity, decline, and eventually, death.

Now let’s return to the question of intrinsic value.

If you believe that currency must be backed by something of value, you probably don’t put much merit on any currency as real money.

If you believe that value is perception, then in theory, any and all currencies are real money - especially when backed by the might of a nation’s military and corporate power.

Finally, pragmatists and the general public alike simply make popularity and market value the measure of a currency’s intrinsic value.

Store of value

This is the last of our criterion for money and is also another subjective issue.

Store of value refers to the retention of value for money over long periods of time. Undoubtedly, gold ranks number one. Since ancient times, gold has retained its value as a form of money. No fiat currency has matched this record.

Compare that record with the store of value period of the US dollar. Since the birth of the Federal Reserve on Dec. 23, 1913 - hashed out in a secret meeting on Jeckyll Island and subsequently signed into law by President Woodrow Wilson, the purchasing power of the US dollar has declined by over 96 percent.

Now some may ask, “What qualifies as ‘a long period of time’. I mean, to a hummingbird with a lifespan of 3-5 years, six years is a very long period of time, no?” To many, that question may sound glib, but it does raise another question. “Who decides what a long period of time is?” Is it over 5,000 years - gold’s rising store of value reign?

Or is it the decade or two - Germany’s currency store of value period - ending with WWII and post war Germans transporting wheelbarrows full of currency to the market to buy a loaf of bread and maybe, just maybe, a bottle of milk?

The point is this: what good is measuring store of value when there is a myriad of monetary and non-monetary factors that can affect the lifespan of any form of money?

Nothing less than gold and silver have an undisputed, dependable track record of value retention. Most people would be pleased if their saved money retains its value - or better yet, increases in value - for at least three future generations of their family.

Honorable mention

Before we dive into the subject of cryptocurrency’s merits as real money, I must submit an “honorable mention” that many believe should be on the list of the criterion for money: Scarcity.

Simply put, the more scarce any resource or asset is, the more valuable it becomes. Things like precious metals are inherently scarce, while inflationary currency is not.

Most cryptocurrencies are non-inflationary. A limit to its ultimate supply and the periodicity of incremental release onto the market is built into its algorithm.

So, is cryptocurrency “real money”?

Now we shall discuss cryptocurrency compared to fiat currency - in relation to the criterion for money.

Medium of Exchange

As a medium of exchange, cryptocurrency is on par with fiat currency. You can use both of them to buy the same things. And as the shutdown of the Silk Road and existence of other online deep-web stores show us, you may be able to buy some things easier with cryptocurrency than with regular currency.


Barring a global EMP - Electromagnetic pulse - that shuts down all electricity worldwide, the portability prize goes to cryptocurrency over fiat currency. Of course, if you are in a revamped cold war bunker or a Faraday cage, even a catastrophic EMP would not affect you.

With the scan of a QR-code, a tap of a smartphone app, or click of a web wallet, cryptocurrency is quickly and conveniently sent or received. Sending the equivalent value in today’s money requires a money transfer intermediary - Western Union, MoneyGram, etc. - and incur exorbitant fees. But even those fees can be eclipsed by the fees charged by banks for wire transfers.

Transporting cryptocurrency is not hampered by size and weight. Paper money doesn’t have that luxury. Moving large sums of paper money from one place to another is both cumbersome and dangerous - and in the case of undeclared, cross-border transactions, highly illegal.

Unit of account

The unit of account award goes to cryptocurrency. One unit of cryptocurrency always has the same value of another unit of the same measure - of that same cryptocurrency.

It can’t be counterfeited

In the digital world, another name for counterfeiting is called a  “double spend” - using the same money twice, making both transactions fraudulent. Cryptocurrency was built from the ground up to counter this “double spend” problem. This is done with Blockchain technology and the various consensus mechanisms built into all cryptocurrency algorithms.

These attributes make cryptocurrency a step above paper money in the unit of account department.


Cryptocurrency exists online and is therefore not a physical object. Physical degradation is impossible. Score another one for cryptocurrency over paper money as it wins hands done in the durability category.

Durability does not equal loss

Many newcomers to cryptocurrency have lost their “keys” - alphanumeric passwords - to access their cryptocurrency; which means no access to their cryptocurrency wallets.

Fortunately, most modern cryptocurrency wallets have backup and restore mechanisms available for wallet owners to setup. But just like a physical wallet, it is the owner’s responsibility to safeguard access to his cryptocurrency wallet and must never let it be vulnerable to theft or loss.

Once sent, cryptocurrency can’t be recalled

If someone sends cryptocurrency to the wrong place or person - wallet address - and wishes to get it back, he can’t. In other words, you can’t make a “redo” of pressing that “Send” key.

On the other hand, business owners who accept cryptocurrency do not have to worry about credit card service fee extortion or questionable charge-backs - the fee charged when the credit card company sides with a customer during a claim of fraud, which is  almost always the case.


Cryptocurrency doesn’t have the fungibility issues which result in one or more currencies attempting to operate outside their authorized environments. Unlike fiat currency, cryptocurrency is non-geopolitical in nature - meaning, its operating environment is worldwide.

This is not to say there aren’t individual stores that do not accept cryptocurrency - there are. But juxtapose that with the number of whole countries that will only deal in their country’s fiat currency, but do accept cryptocurrency. In my opinion, cryptocurrency edges out fiat currency here.

Intrinsic value

As stated before, if you believe that currency must be backed by something of value - whatever that something is, you won’t believe that any currency is real money. However, if you believe that intrinsic value is a matter of individual interpretation, then all currencies have the potential to be real money - "Might is Right” or “In Corporations We Trust” mentality.

And if you are more concerned in just satisfying daily, real life transactions quickly, or that market value is all you care about, then the most convenient and popular currency will be your measure of intrinsic value.

Store of value

If you’re a historian or plan to live forever, theoretically, only things like gold can truly have a store of value. But if you’re a mere mortal, you may as well pick an arbitrary length of time that a form of money must be viable and decide whether the currency will outlive your use for it.

So, knowing what you know now, do you believe cryptocurrency is real money?

- By JaiChai

JaiChai has been in the cryptocurrency space for over six years. He’s known for submitting philosophical and contrarian posts on most cryptocoin forums.

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