Can Bitcoin Replace Government-Issued Money? A Debate

Watch economists Saifedean Ammous and George Selgin face off at the Soho Forum.


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"Bitcoin is poorly suited to the purpose of becoming any nation's main medium of exchange."

That was the topic of a public debate hosted by the Soho Forum in New York City on August 12, 2019. It featured George Selgin, director of the Center for Monetary and Financial Alternatives at the Cato Institute, and economist Saifedean Ammous, author of The Bitcoin Standard: The Decentralized Alternative to Central Banking (2018). Soho Forum Director Gene Epstein moderated.

It was an Oxford-style debate, in which the audience votes on the resolution at the beginning and end of the event, and the side that gains the most ground is victorious. Ammous prevailed in the debate by convincing 23 percent of audience members to change their minds.

Arguing for the affirmative was Selgin, whose books include Less Than Zero: The Case for a Falling Price Level in a Growing Economy (2018) and Floored! How a Misguided Fed Experiment Deepened and Prolonged the Great Recession (2018).

Ammous argued for the negative. An associate professor of economics at Lebanese American University, Ammous is also teaching an online course in bitcoin and Austrian economics.

The Soho Forum, which is partnered with the Reason Foundation, is a monthly debate series at the SubCulture Theater in Manhattan's East Village.

Music: "Modum" by Kai Engel is licensed under a CC-BY creative commons license.

Produced by Todd Krainin.

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  1. No. Because how are you going to force people to use it? Then how are you going to force people to accept it?

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      2. People might accept it if it is useful relative to the prevailing fiat currency. In the US, that’s largely not true–at least with the currency itself. However, the heavily-regulated payment processors seem to be inching toward exiling people who don’t follow their political agenda. This is an invitation for cryptocurrencies.

        In other countries, the value proposition of Bitcoin is even higher, as it competes with the local currency.

    1. Not to mention once the government starts using it for stuff, the 1A applies and you get into hairy questions like, “Can the public force decryption/de-anonymizing of the blockchain to reveal campaign donors and contract recipients?”

    2. I don’t understand your comment. If Bitcoin’s (or any cryptocurrency) utility appealed to a large enough percentage of the population, people would gravitate towards it like they did from the flip phone to the smart phone.

      Crypto is a market like any other (which doesn’t mean I believe it’s going to work or be successful).

      1. If I say “We don’t accept Bitcoin from your kind here.” or “Your trannie money is no good here.” how is the government going to force me to accept your money?

        1. The problem is more thematic or fundamental than that, but I believe that’s the specific illustration he’s referring to. Our money says “legal tender for all debts public and private”, bitcoin does not and even if it did it’s implications would contravene other features of a non-fiat currency.

          1. But someone absolutely could require payment for goods and service in Bitcoin if they so choose–it doesn’t have to be legal tender for that. True, you can’t force anyone to use it, but that doesn’t negate its other values.

            1. But someone absolutely could require payment for goods and service in Bitcoin if they so choose–it doesn’t have to be legal tender for that.

              What if I accept cash, charge, check, and bitcoin from all my white customers but require bitcoin from all my black customers?

              1. What does that have to do with anything? Presumably that is discrimination based on a protected class. If you require BTC from all customers, it doesn’t violate the CRA.

                1. Presumably that is discrimination based on a protected class. If you require BTC from all customers, it doesn’t violate the CRA.

                  Either it is discrimination based on a protected class or it doesn’t violate the CRA, which is it? If we reverse things; C3 for everyone, BTC only for white people can a black person sue me into accepting bitcoin?

                  Cash/Fiat (supposedly) has lots of solutions to social ills (real or perceived) baked in. BTC can’t replace it without accommodating/adopting them whether they blockchain/crypto sense or not, or it’s ability to solve social ills isn’t more on par with Jim Crow Era (or earlier) dollars rather than current dollars.

                  Either it’s a fiat currency and courts can order you to pay in it or it’s not and courts will order you to pay in dollar equivalents at market prices.

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  2. Not going to listen to it. Might read a transcript. I do wonder what they discussed. Bitcoin itself doesn’t scale well enough to be a universal currency with millions of little transactions all day long, but I think digital currencies, or more generally private currencies, would be a godsend for reforming government spending. Not a solution, but an invaluable first step in forcing government to face fiscal realities.

    1. I think there’s a chance that a layer 2 solution like lightning network might help.

  3. No, because crypto are nothing more than exchange currencies. Their extreme volatility is not desirable for actual currency. You want a dollar you’re paid to be worth the same tomorrow and a year from now and a few years from now as well. If we were still pegged to gold or god forbid used crypto of any kind, we would experience multi-thousand percentage point inflation.

    People take a risk with crypto because it tends to be an okay store of value for a quick exchange from real money -> crypto -> back to real money over the course of an hour or two during a transaction that you don’t want to be seen. Anything past that and crypto becomes irredeemable garbage and legalized gambling.

    1. Volatility is a function of acceptance by the market, not an inherent feature of cryptocurrencies.

      Note that hard currencies and traditional fiat currencies (that is, currencies issued by governments) have all experienced wild volatility at times. That did not make them unacceptable as currencies within their jurisdiction.

      1. Any cryptocurrency that is trying to disintermediate govt will inevitably have more volatility risk than either a govt cryptocurrency or a private cryptocurrency that is not trying to disintermediate govt.

        1. I respectfully disagree. Such a cryptocurrency might be more volatile that the most stable govt-issued currency. But volatile as it is, bitcoin is still remarkable more stable as a store of value than, say, the Venezuelan bolivar.

  4. Uh, sure it can. Why is this even a debate. The questions have never been ‘can it?’ but ‘do we want it?’ and ‘will the government kill people over it?’

    FFS, *laundry detergent* has replaced government issued money. There are parts of the world that are basically back on the barter system because the government issued money available is so worthless.

    1. FFS, *laundry detergent* has replaced government issued money.

      Sure, because it was identified to be ~$20 US in value. And I would argue that laundry detergent has more utility to the average American than Bitcoin does. It’s a physical thing which everyone purchases (JUST LIKE HEALTHCARE!!1!!) and it has a measureable, steady monetary value.

      1. And you can buy it with food stamps.

      2. And? If the US dollar crashed laundry detergent would still be worth trading in – even though its now worth $20,000.

        Multiple things have value to people, multiple things are stable stores of value – that they may be stores of *monetary* value is only important so long as the money itself has value. No one is going to trade you a bottle of detergent no matter how many Zimbabwean Dollars you put on the table – yet that’s money, the same type of thing the US Dollar is.

      3. I personally don’t think that is posible, will all the country in the world agree to it, people will simply criticize it and it will just end there…. It is like imposing a mobile app upgrade version on people and people will only use it if it is better than the previous ones they were using.

    2. Uh, sure it can.

      Disagree. The debate to me can be rephrased “Can a non- or anti-fiat currency be a fiat currency?”

      No. Full stop. Bitcoin can partially replace the US Dollar but to wholly replace it, it would have to stop being bitcoin in a lot of pretty fundamental ways.

      1. Well, yes – if, like fiat currencies – you demand that all government transactions are done in them.

        . . . it would have to stop being bitcoin in a lot of pretty fundamental ways.

        In what ways? Anonymity? Cash is just as anonymous. Government control of the money supply? That’s the only real thing it doesn’t allow – and to many people that’s a benefit. We’ve been reeeeeeal lucky that the Fed has both maintained its independence and been run by genuine ‘Top Men’ – it doesn’t take much of a screwup to wreck the economy if you expand too fast (or not expand fast enough) the money supply.

        1. Anonymity? Cash is just as anonymous.

          What units are you measuring anonymity in? How do you convert anonymity (lack of identity) to secrecy (lack of general knowledge or knowledge about specific action) and vice versa?

          When I say ‘fiat currency’ and you say ‘cash’, you realize that there’s an ocean of difference between the two, right? That a dollar in cash is a dollar in credit and that while the cash may be anonymous, the credit isn’t and that the dollar hasn’t changed, right?

      2. I think you have your definitions wrong. A fiat currency is any money is not backed by a physical commodity. It can be established as legal tender by government declaration (hence the name “fiat”) but it can also be established by general societal acceptance. In other words, if enough of us decide that it’s good as currency, then it is.

        That said, as long as acceptance of bitcoin is voluntary, it can’t fully replace a currency that the men with guns said is “valid for all debts”. In particular, the government would have to decide that you may pay your taxes with bitcoin before it could fully replace the dollar.

        1. In particular, the government would have to decide that you may pay your taxes with bitcoin before it could fully replace the dollar.

          Right, this is the sense in which BTC could not fully replace the dollar.

          1. But contrary to mad’s comment above that “it would have to stop being bitcoin…”, that doesn’t require a change to bitcoin. That’s just a change to government policy.

        2. I think you have your definitions wrong.

          Considering I didn’t give my definitions, this would be pretty insightful of you.

          My point is that your definition gives two conditions that are imprecise and non-exclusive. We can pretend that Bitcoin could replace the dollar but we could just as easily pretend that the current dollar isn’t backed by a commodity and is/was popular and established by the people or general social acceptance and is, by definition, not a fiat currency.

          Maybe another way to put it is that you have an immaculate conception-style view of the way currency is/was invented or created. A view which isn’t wrong when categorizing currencies, assets, and commodities until you start trying to convert and asset to a currency.

          I think you’ll agree that pretending our invisible green (or green invisible) currency is both invisible and green at the same time doesn’t make anyone more free or prosperous.

  5. Can Bitcoin Replace Government-Issued Money? A Debate

    As Bitcoin stands right now, it can only be a supplement to standard fiat/government currency. It can be useful as a temporary way of transiting borders or regulatory schemes, with fiat money converted to bitcoin for a short time, then converted back to fiat currency for purposes that might include legitimate activity, criminal activity, moving money in or out of hostile governments etc.

    As a store of value or investment it’s incredibly dangerous.

    1. Since I presume the debate is about *Bitcoin* specifically and not ‘cryptocurrency’ in general, then it’s possible that A cryptocurrency could replace government money, but of course, not without a fight.

      1. then it’s possible that A cryptocurrency could replace government money, but of course, not without a fight.

        Again I disagree on an existential level. There is no war on dollars. Without a fight, the government is going to get all the back doors and economic monitoring hooks that it wants, with a fight there will be a decades long, if not longer, war on money.

        1. How is it going to get backdoors? Backdoors to what?

          1. How is it going to get backdoors? Backdoors to what?

            In the vague context of ‘without a fight’:
            -The bitcoin community hands over majority or total control of mining/network operations to the government/fed.
            -The bitcoin coummunity retains control of mining/netwrok operations but government/fed takes over development of the BTC protocol.
            -The bitcoin community retains control of the mining/node operations *and* the development operations but agrees to conduct all communications through government owned/monitored networks.

            Any one of these and various permutations of the above (e.g. the government picks which ciphers can encrypt the communications on its networks and only backs transactions done on it’s network or with it’s nodes) would effectively make the production and/or flow of bitcoin government controlled in a manner antithetic to bitcoin’s creation.

        2. What would stop the US from issuing its own Cryptocurrency? That’s why I presume this debate is about Bitcoin specifically, or if I allow for a little wiggle room, a non-government-controlled cryptocurrency that supplants the traditional government-issued unit of currency*.

          *which we presume to be fiat. Is there currently a country which issues legal tender backed by gold?

          1. Why is VISANet not considered a cryptocurrency protocol? Decentralized? Check.
            Government created and owned? Nope.
            Fully, P2P, encrypted? Check. With EMV it’s encrypted and lightly block chained down to the transaction.
            Tied to a commodity? Nope. Not even really tied to a currency.

            All of the above are true and, repeatedly, it’s explained how bitcoin is a currency that will replace *credit* cards. A lot of nuance gets consistently glossed over in these discussions.

  6. Should be interesting. I know George Selgin, and he is NOT anti-bitcoin. He’s just as “Austrian” as anyone else. But he is a pragmatist with it comes to money. My guess is that he’s pointing out the inherent flaws in this particular digital currency model. Bitcoin is based on the premise that money has value simply due to its scarcity. Specie may be scarce, but that’s not why it has value.

    1. “Bitcoin is based on the premise that money has value simply due to its scarcity. ”

      That is not at all my understanding… its “value” comes because people subjectively value it (tautology); why the do so can be seen for me at least in Menger’s qualities of a good “money”, e.g. transportability, fungibility, divisibility, etc.

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  8. Who cares? #StatismSucks

  9. Not if the Fed and the ECB have anything to do with it! They’ll be fighting it every step of the way!

  10. Private conveyance of money is a human right.

    detractors like to state that Bitcoin is only pseudo anonymous. The big difference is that a government was not involved in the creation of Bitcoin so knowledge of the bearer is not inherent.

    Schemes such as kyc, visa, mc have destroyed the anonymity of US currency. it seems that the government feels that they have the right to know and tax every thing you do.

    Crypto’s offer an alternative to surveyed Fiat money. I was an early adopter and continue to support the Bitcoin – crypto movement.

    any libertarian worth his salt should realize this. Money without government interference, built-in taxation, borders or high fees. Bitcoin is liberation. Be your own bank!

  11. It can’t, because the primary feature of dollars is that they are based on trust. People give the dollar value because they trust the US Federal Government to accept their dollars as legal tender and not to muck about the with the value too much (whether that trust is misplaced is another debate entirely, the fact IS however that people generally trust the US government to print money, at least more than anyone else in the world). If I have a large amount of wealth I want to store it in US dollars because I can easily spend it on most of the things in the world I would possibly wish to buy, I can be reasonably sure that it will be worth roughly the same amount tomorrow, and if I should choose to buy something else or convert my wealth into some other medium dollars are readily able to do that. Bitcoin fails all three of these tests, particularly the stable value one.

    There’s one additional problem Bitcoin has though, it’s just a solution to a math problem. It is quite literally just a number. Whatever dollars may be, physical object or quantity on a spreadsheet, there is never ambiguity on who owns them. The fact that YOU own your dollars is a fundamental aspect of currencies that Bitcoin can never achieve. You don’t OWN your Bitcoin. You have a number that you keep secret from everyone else. If the secret ever gets out or if some math genius ever cracks the math problem then your Bitcoin is just gone. It’s not stolen. You can’t get it back. You can’t call the cops. It’s just gone. The number and the secret no longer exists.

  12. Some mythical character that no one had ever seen created a virtual monetary unit, the so-called “currency” and valued it at tens of thousands of dollars. No less surprising are the inhabitants of this planet who are happy to follow its course, many even buy through nat.el. the system – tenths, hundredths of this “myth currency”, instead of a more real investment.

  13. For me I will say cryptocurrency and not just Bitcoin, with the current trend these cryptocurrencies might replace the cash we spend soon. There is no need to use force, things will fall in place when the time comes

  14. This is not suppose to be a deliberation again, cryptocurrency is now at its peak and most of the people are now investing on it with millions of people striving to get these coins in their pocket. So it might replace paper money in the near future if governments approve of it

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