While Bitcoin has risen in mainstream popularity, with institutional adoption rising at an unprecedented pace, skeptics of cryptocurrencies cite the potential of government intervention to outlaw its use as a currency as a reason not to invest.
Michael Saylor, CEO of MicroStrategy, said that even if Bitcoin’s use as a form of payment is regulated or even outlawed, the world’s largest cryptocurrency would still not face any threats to its primary use case, which is a store of value, and so no existential threat should be considered.
“I think that Bitcoin is going to be the emerging strong money store of value asset in the 21st century,” Saylor told Michelle Makori, editor-in-chief of Kitco News. “There are 8 billion people that need a strong money or a monetary asset. If they’re going to live a decent life, that asset needs to be digital.”
In fact, the word “cryptocurrency” itself is an oxymoron as Bitcoin and other cryptos should really be regarded as a “crypto asset,” Saylor said.
“Money can be decomposed into a currency component and an asset component. And these aren’t really cryptocurrencies, they’re crypto assets. And Bitcoin is a crypto asset,” he said. “And I think that if you look at comments, probably commentary by Jerome Powell, by Christina Legarde, by the Deputy Governor of the Chinese central bank, by Gary Gensler, they’ve all commented that this is a digital asset. It’s not a digital currency.”
The difference between a store of value and a currency lies in the asset’s use cases. For Bitcoin, investors use it to primarily to speculate with and to store wealth, while only a fraction of it is being used as payment vehicle, Saylor said. In that sense, governments are unlikely to see it as a threat to fiat currencies.
“It’s very important to understand that the future of the world is 8 billion people with mobile wallets, with a currency layer and an asset layer. The currency layer is going to be the dollar and the Euro or the Chinese Yuan. And the asset layer is going to be Bitcoin,” he said.
The delineation between Bitcoin’s use as a store of value and its role as a currency, and hence threat to governments, can be highlighted in Turkey’s recent decision to outlaw Bitcoin as a form of payment.
Saylor noted that while Turkey forebode Bitcoin to be used as a currency, the government did not restrict its use as an investment.
“In the example of Turkey, they didn’t want people use it as a currency. That’s no different than what the IRS said in 2014 in the U.S. when they actually taxed it on transfer, they also effectively said, you can’t use it as currency. So, basically stating that we don’t want something to be used as currency because it threatens our currency is not the same as depriving people of an asset. And even the Turkish central bank hasn’t deprived, or hasn’t limited Turkish citizens from owning the asset,” he said.
What the governments could be concerned about, down the line, is blockchain applications that allow the transfer of large sums of capital, like stable coins, Saylor said.
“They’re going to be concerned about stable coins, like the ability to move billions of dollars of euros on a crypto rail, or the ability to move billions of dollars of us dollars on a crypto rail. That’s going to draw the interest of the banks because currency is the provenance of the bankers and the government. And they’re going to be concerned about controlling their currency,” he said.
For more information, watch the video embedded above.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.