Roger Svensson, Associate Professor of the Institute of Industrial Economics, suggests Bitcoin (BTC) is unsuitable as a medium of flat money for international currency. The scholar told the Financial Times Monday.
El Salvador President revealed last week that he intends to introduce a bill to legalise BTC as its legal tender to become the first country to accept BTC for boosting its economy. Svensson argues that BTC does not meet any primary conditions as an international currency. Firstly, BTC volatility is much greater than other dominant currency in history, such as the British pound or the US dollars.
He also thinks the price and the relative values of BTC are too fluctuating and unstable, which is a disadvantage to international trading. Also, the transaction cost is high enough due to its capacity of transaction system is limited and time-consuming within a period to meet the market’s needs.
Without a guarantee from an issuer, its political risk cannot be neglected if any or more than one government or regime prohibits the transaction of BTC. For instance, China regulatory bodies banned banks and financial firms from providing crypto transaction services recently.
Money is considered as the lubricant in the economy. However, Svensson criticises that BTC does not have this monetary function to act as a medium to store value or reduce transaction costs because BTC is only accepted within a limited group. However, BTC is treated as one of the cryptocurrencies. Still, anonymous characteristics may lead to a difficulty for the third party to trace back and recognise who is behind those transactions, which is risky to commit crimes, such as money laundering or tax evasion behaviour.
Furthermore, the energy consumed by BTC mining is environmentally unfriendly and high demanding to the “currency issuance”.
The trading of BTC recently was undergoing like a roller coaster. Elon Musk, the CEO of Tesla, has used to suggest on Twitter by accepting crypto as a way of payment but withdraw himself later, the price of BTC was experiencing a considerable fluctuation.
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