The Federal Reserve Bank of St. Louis has identified several common qualities of bitcoin and fiat currencies. Earlier this year, the US Internal Revenue Service (IRS) reminded that transactions with cryptocurrencies should be taxed like transactions with any other type of property. The service considers cryptocurrency (not just bitcoin) to function in the same way as traditional currencies, but nevertheless considers it property and not currency for tax purposes.
The Federal Reserve Bank of St. Louis is more consistent in its statements. In a post on its official website, the bank lists three similarities between bitcoin and traditional currencies.
-Neither bitcoin nor cash have any intrinsic value. Digital currencies exist as data. The money in your wallet is a blend of 75% cotton and 25% linen. Neither data nor paper have intrinsic value.
The claim that data in and of itself has no value may raise some questions. The issue of data protection has been a significant issue over the past few years, especially when it comes to information distributed on the Internet. Why do we want to protect something so much if it has no intrinsic value?
-For any currency to retain its value, its supply must be limited. This is called scarcity. If you had a dollar in savings and there were only ten dollars in global circulation, you would hold 10% of the world's money supply. However, if there were tens of trillions of dollars, then your dollar would have no value.
The blog states that while the Federal Reserve can increase or decrease the monetary base, it does not print money. As of March 21, there were about $1.63 trillion in circulation. $1.59 trillion is in notes issued by the Federal Reserve Bank. Call it scarcity.
Bitcoin, on the other hand, has a limited supply of coins. It is not tied to any bank, reserve or institution. Bitcoin is limited to 21 million coins that can be mined.
And the last point noted by the Federal Reserve Bank of St. Louis.
-Cash does not require an intermediary to process the transaction. Unlike paying by credit card or through an app, no third party adjusts your account.
On the other hand, when was the last time St. Louis Federal Bank made a $100 million cash payment? Also, if you want to transfer money to another country, you will have to use the services of some kind of intermediary.
Bitcoin allows you to transfer funds anywhere in the world without intermediaries.
According to http://bitcoinist.com
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