Mario Draghi, President of the European Central Bank, said bitcoin is volatile, with its value oscillating widely, thus he would not call it a currency.
In answering questions by the public earlier this year, Draghi said “a euro today is a euro tomorrow, its value is stable.”
He further said “currencies are backed by their central banks or their governments, nobody backs bitcoin.”
Draghi said that ECB doesn’t have responsibilities over bitcoin or cryptocurrencies in general, with the head of the central bank further adding that blockchain technology is very promising and they are looking at potential utilizations. Blockchain tech can allow you to automatically pay invoices for example, he said.
These comments did not attract much attention at the time, but have now resurfaced, attracting comments by bitcoiners that inspired our meme picture above.
One bitcoin today is one bitcoin tomorrow, its value is very stable. Its supply is currently increasing, but eventually there will be only 21 million bitcoins.
One euro is not one euro. The supply of euros constantly increases without public accountability, oversight or control as commercial banks are free to decide how many euros to effectively print by lending money.
Therefore two euros today can be one euro tomorrow, or as Venezuelans are seeing, in certain circumstances you might need one million euros to be worth what one euro was.
Moreover, a Greek euro might be different to a German euro depending on circumstances, so at times there might be a lack of fungibility even between euros, although they are moving towards a monetary union.
In the narrow way Draghi applies stability, therefore, you can argue bitcoin is the most stable currency ever for one bitcoin is always one bitcoin, whether tomorrow, next decade, or next century.
In a wider context, however, the euro can be very unstable. It is always up and down against the dollar, and against bitcoin it has been mostly down, with €100 able to buy you 100 bitcoin some time ago, while now you need thousands of euros for just one bitcoin.
Moreover, his statement that “currencies are backed by their central banks or their governments” is obviously clearly misleading. Gold was a currency for millennia, yet no one backed it.
Government “backed” currencies are a very new phenomena barely 50 years old. As we are seeing in Venezuela, such currencies have no real backing. How does the government back the dollar, pound or euro?
The only way there is any “backing” is by the government or central banks deciding not to print too much or too little, but the fact they can make such decision is the opposite of backing.
To the contrary, it is a central command money system where detached individuals decide how much money the economy needs, with their decision necessarily wrong as they can not possibly account for so much complexity, leading to too much money printing and asset bubbles that then crash into recession or depression.
The only real argument that bitcoin or cryptos in general do not yet act as a currency at scale is that they are not a unit of account at scale. They are to a limited extent, but not as widely as say the euro to the point where bitcoin wouldn’t need care what its value is against another currency.
Because volatility applies to all currencies, and as for backing, bitcoin is backed by the rules enacted in code, and more generally it is backed by the people where no individual or group has control to abuse their power as central banks and governments often do when it comes to money.