For Bundesbank board member Thiele Bitcoin is no money

Bundesbank board member Carl-Ludwig Thiele and Bundesbank analyst Martin Diehl have argued that Bitcoin is not money. We take a look at the reasoning.

For the Bundesbank board Thiele Bitcoin is no money

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In the midst of the current Bitcoin hype, Bundesbank board member Carl-Ludwig Thiele has now spoken up. In a guest contribution, which was published in the Ifo Schnelldienst and Thiele has written together with the Bundesbank analyst Martin Diehl, he raises the thesis that Bitcoin is no money. Money defines Thiele as something that fulfills the following three functions: It can be used as a means of payment, as a store of value and as a unit of calculation. "Bitcoin fulfills none of the three monetary functions in the economically relevant extent, because it does not extend beyond a niche and is extremely value-unstable," conclude Thiele and Diehl.

 "In a dynamic world, rigid algorithms are likely to result in suboptimal money supply."

   

"In a dynamic world, rigid algorithms for the development of the money supply should lead to a sub-optimal money supply," it says in the text marked as a contribution to the discussion. From this, the two authors conclude that a central bank that respects stability and operates independently is a necessity. It is not surprising that Thiele and Diehl represent this opinion - after all, both represent the central bank of the Federal Republic of Germany.

Bundesbank executive also sees digital central bank money rather skeptical

Thiele and Diehl also deal with the question of whether it would make sense to issue a blockchain-based central bank money. First, the question must be clarified whether such a system would be value-based as in cash or more account-based as deposits would work. Depending on the design, this would have different effects on the entire economy. While Thiele and Diehl acknowledge that several central banks are already exploring the potential consequences, it is not possible to predict at this juncture what impact such a model might have on the economy.

 
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Thieles and Diehl's text can be read here in PDF format. Apart from the article of the two Bundesbank representatives, there are four other articles by economists on cryptocurrencies. The authors are Jochen Michaelis (Chair of Money, Credit and Currency at the University of Kassel), Volker Brühl (Managing Director of the Center for Financial Studies at Goethe University Frankfurt), Dirk Elsner and Gerrit Pecksen (DZ Bank) and Thomas Mayer (Flossbach of Storch Research Institute).