Central Bank of Finland: cryptos are an “error”

The report recently published by the Central Bank of Finland and written by the director of the Digitalization Department, Aleksi Grym, is far from innocuous. Named “The great illusion of cryptocurrency”, the director explains on 18 pages why the fundamental nature of money is still poorly understood, and how the Internet and social networks have “blurred our sense of reality and fiction” .

Currency can not be digitized

Recently ranked as the ” happiest country in the world ” in 2018 by an organization close to the United Nations, Finland does not seem to be a land of welcome for cryptocurrencies . More than the Nordic country itself, it is rather the Central Bank of Finland which is not very partisan of these alternative currencies .

The year 2008 was a year of choice for the inventor of Bitcoin; but this particular year is marked in the minds of Finnish economists by a terrible shock that affected the country’s economy. The metallurgy sector, exports, the technology industry and many others had been heavily affected, driving the Finnish economy down by 8.5% the following year . Would the central bank protect itself against any speculative bubble?

According to the director of digitalization, cryptocurrencies are not real currencies per se , but rather ” accounting systems for nonexistent assets “. Aleksi Grym advance that technology ” registers distributed” (distributed ledgers,  DLT ), as blockchain are the same as other archive systems ” unrelated to the fundamentals of money .”

He keeps on :

“For all intents and purposes, this register is a centralized registry. The fact that there are several synchronized copies, spread over a network, is irrelevant because each of them has the same data . 

Could a digital currency really exist?

The study mentions numerous Bitcoin (BTC) analyzes and cryptos in general, but all have a very negative view. These are described as speculative instruments where a bubble has already formed and whose ” fundamental value is zero “. Concerning the possibility of digital currencies being issued by a government institution, Grym states that they ” would mainly constitute central bank accounts for the general public ” and in the process discredit them. His report states that “it is doubtful to suggest that the decentralization of a new payment infrastructure will offer significant advantages over the one currently used. 

Further in his report, the director in charge of digitalization notes that the definition of money has changed over time, but that it is normally described as a unit of exchange, a store of value, but also a unit. account . Grym argues that money is not created “from scratch” but rather comes from the transformation of liquidity, unlike cryptocurrencies (which it implies of course).

At the latest news, Finland and its researchers were leaning towards a more positive approach towards these alternative currencies . Could we say now that the wind has turned?

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