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Monday, June 23, 2014

UK Economists Recommend to Replace Pound with Bitcoin

Professor of finance and economics at Durham University recommended the United Kingdom to privatize the pound and replace it with a cryptocurrency. He says that Bitcoin is not the first example of private money, but the cryptocurrency is the first one that governments are unable to shut down. In result, the authorities should admit that Bitcoin is here to stay, and allow competition between the alternative forms of money.
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This suggestion might include allowing taxes to be paid in Bitcoin or Dogecoin, or even fully privatizing the national currency. The economist placed Bitcoin at the pinnacle of a historical trend of government crackdowns on its citizens’ attempts to create private money. It is known that the creators of physical and electronic currency both ended up in court, the former being accused of counterfeiting, and the latter of money laundering. However, those charges were politically-motivated protectionism. Since Bitcoin is decentralized, it is harder to crack down on through the court system. If cryptocurrency does become popular, the governments will have to deal with it some other way.

However, the creators of cryptocurrencies realize that there's a lot of standing in their way before they reach that success. After all, to displace existing national currency they not only have to perform the basic functions of money better that state money, they also need qualities that transcend the way in which state money works.

The advocates of Bitcoin believe that those qualities come in the form of protection from inflation. Indeed, the cryptocurrency will only ever have 21 million coins created to make sure that it will always hold its value. On the other hand, its critics render the Bitcoin economy prone to deflationary slumps.

For some, those qualities come from the purely digital nature of the currency. They describe it as the financial equivalent of the worldwide web, saying that the Internet was a new way to transmit data, just like Bitcoin was a new way to transmit money. Of course, this process will take a long time, but it is a big opportunity. The economist explains that money is a very important issue, so if you can build a new way to deal with it, it's very valuable though time-consuming.


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