According to an article by Forbes, in recent years, there has been an increasing focus on Bitcoin itself and its potential impact on national monetary policies. These research results indicate that Bitcoin and other cryptocurrencies may restrict the traditional role of central banks in economic management.
The article mentions that much of this research comes from institutions such as the Federal Reserve Bank of Minneapolis, the European Central Bank, and the International Monetary Fund (IMF).
Multiple research findings suggest that Bitcoin and other cryptocurrencies may limit the traditional role of central banks in economic management.
The article further points out that researchers from the European Central Bank have published two papers on Bitcoin with contrasting views. The first paper, published after the collapse of FTX in 2022, described Bitcoin as a failed currency experiment. However, in 2024, the same researchers from the European Central Bank published another paper acknowledging the existence of Bitcoin.
The latter paper also points out that the existence and continued rise of Bitcoin have significant implications for wealth distribution. The research suggests that as the price of Bitcoin rises, early holders of Bitcoin will increase their wealth. However, since Bitcoin itself does not increase economic output, this growth can only come from the weakened purchasing power of others in society who are not involved in Bitcoin.
This phenomenon aligns with the Cantillon Effect proposed by the 18th-century economist Richard Cantillon. Cantillon believed that when central banks print money, those who are the first to access the money supply (the wealthy or banks) benefit the most, while the purchasing power of ordinary people is diluted.
In addition, the redistributive nature of monetary policies by central banks is widely discussed. For example, quantitative easing (QE) policies involve central banks stimulating the economy by printing money, leading to wealth transfer among different groups. The increase in the value of Bitcoin, similar to monetary policies, redistributes existing wealth but may not necessarily create new economic value.
Furthermore, a research report from the Federal Reserve Bank of Minneapolis in the United States suggests that when people are able to freely buy and hold Bitcoin, governments will find it more difficult to maintain budget deficits. In general, governments can exceed tax revenues through issuing government bonds, and to achieve this, the value of government bonds must remain stable. However, when Bitcoin is available as an alternative, governments may only be able to spend as much as they receive in tax revenues, which would severely impact the bond market.
The report states that there are only two ways to address this issue: either completely ban the use of Bitcoin or impose special taxes on Bitcoin holders.
Additionally, the International Monetary Fund (IMF) also highlighted in its 2023 policy report how cryptocurrencies can weaken the effectiveness of monetary policies, especially in emerging markets with unstable currencies and weak monetary frameworks. The report recommends that countries first focus on strengthening monetary policy frameworks and related institutions.
The report points out that currency substitution (cryptocurrencyization) is more likely to occur with stablecoins pegged to foreign currencies, as these stablecoins can provide a relatively stable alternative compared to more volatile cryptocurrencies like Bitcoin. The report specifically advises against granting cryptocurrency legal tender status as it would further weaken monetary sovereignty.
From the aforementioned reports by the European Central Bank and the IMF, it can be observed that monetary policy makers are taking Bitcoin more seriously than before. Although the reports do not represent the specific thoughts of decision-makers, they clearly indicate a growing concern about the potential impact of Bitcoin on monetary policies.
This increased attention is not only reflected in academic research but also in actual policy measures. For example, in the IMF’s relief plan for Argentina in 2022, several restrictions on cryptocurrencies were included, demonstrating concerns about their risks.