In a blog entry posted 25 April, the Federal Reserve Bank of St. Louis likened Bitcoin to fiat currencies in a validation of one of the core premises of the currency.
The post, titled Three Ways Bitcoin Is Like Regular Currency, is based on research previously conducted by the reserve bank. While the study found that ”Bitcoin units have no intrinsic value”, it also acknowledged that currencies “such as the US dollar, the euro, and the Swiss franc… have no intrinsic value either”.
This provides a valid counter-argument to the misguided criticism that claims Bitcoin has a monetary value of zero because it is not tied to any real-world commodity. As the research points at, since the dismantling of the gold standard in the 1970s, the vast majority of national reserves rely on trust as a medium of value exchange.
The US dollar, for example, relies on a trust in the government and economy for their transactions to be facilitated. Bitcoin and cryptocurrencies, on the other hand, rely on computer coding and for the majority, the blockchain to facilitate transactions.
Libertarian proponents of cryptocurrencies have also argued a similar case to that of the Fed’s new study, but with an entirely different conclusion reached. They believe that cryptocurrencies are in fact a better alternative to national currencies, as they are not at risk of devaluation via inflation.
Bitcoin instead has a strictly fixed supply, as opposed to the Fed that has the ability to expand the money supply, even if not directly through printing more bank notes.
While the post does not directly endorse the use of Bitcoin or other cryptocurrencies, it does provide a certain amount of credibility, and authority as the comments come from an American federal agency.
However, the reserve bank of St Louis has previously been skeptical of Bitcoin, posting an entry in February 2015 that demeans the currency as inefficient. Some of the reasons cited in this post include the inefficiency of requiring mining as a proof-of-work model and the energy wasteful nature of this process.