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The world is still coming to grips with an inevitable future of purely digitized society. The future of the world’s monetary system is pretty important to gain control of, hence a “staff working paper” was commissioned by the Bank of Canada, the nation’s official central bank.
Bank of Canada Gives ‘Lessons’
In this paper, titled Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies, some very original conclusions were made regarding Bitcoin, which seems to have been the target of the study.
We will provide the cliff notes version of them for you to digest, as long as you aren’t eating while reading this entry. Viewer discretion is advised.
The paper was penned by Ben Fung, Scott Hendry and Warren E. Weber who each claim sole responsibility for these findings in the disclaimer as they seek to not have Bank of Canada besmirched for their conclusions in the paper.
It would be impossible for us to know if they were commissioned to come up with these conclusions at the behest of the bank itself, however. You and I must certainly trust a central bank’s employees in regards to the merit and regulation of a decentralized digital currency. Of course.
‘Private Digital Currencies Will Not Be Safe’
Now onto the fun. The authors surmised, based on the history of the Canadian “private bank notes,” which would be equivalent to Bitcoin in the present day, and the Dominion notes, or government issued notes, that Bitcoin’s cryptocurrency today would exhibit the following properties and require the following modifications by their centralized authority:
The paper draws several lessons for digital currencies based on the evidence from Canada and the United States with bank notes and government issued notes: Digital currencies likely will be counterfeited, Digital currencies likely will not be inflationary; Private digital currencies will not be safe and will not be a uniform currency without government intervention; A central bank can always get its digital currency into circulation, but its digital currency will not necessarily drive out existing private digital currencies.
The “evidence” they reference from the U.S. is the book “Beyond Bitcoin,” published in New York, last year. All the other sources in the appendix were Canadian-based, as they recount the history of these ancient forms of currency. By ancient I mean over one hundred years old in human history, predating any living person.
They complimented cryptocurrency Bitcoin or “digital currencies,” by likening it to these notes that offered relatively safety from counterfeiting at the time, a high degree of safety as a store of value, or being redeemable in the future, scarcity, uniformity, ease of transferring, and other indicators of being a good “medium of exchange.”
I Didn’t Know You Could Counterfeit Bitcoins
Here’s where it gets dicey. After a lengthy history lesson on the ancient forms of Canadian currency, they come back to digital currencies. They arbitrarily decide that “National bank notes and Federal Reserve notes were also counterfeited.”
“Given this history, it is likely that digital currencies would be subject to criminal attempts to counterfeit them,” they conclude. I guess that settles that!
So they deemed Bitcoins counterfeit-able just because other forms of currency have been counterfeited, so Bitcoin must follow suit. I didn’t know you could counterfeit Bitcoins. Countless computer hackers and experts the world over, far wiser than these authors, have tried and failed to do so, but as long as they say so.
In any case, the authors manage to extrapolate this counterfeiting of Bitcoin narrative into the following:
It is also the case that counterfeiting for a digital currency would be much more catastrophic than for paper currency. One counterfeit paper bill does not mean the next is also counterfeit. Historically, counterfeiters tend to focus on one or two particular denominations. But one counterfeit digital currency ‘coin’ would almost certainly quickly undermine the confidence in the whole system because it would be much more likely that the other ‘coins’ can be counterfeited too.
Uh…so Canadian, American, and virtually every other currency note in the century-plus history of central banking haven’t been redesigned to prevent counterfeiting?
So you can do that to paper currency, every ten years or so, without “undermining the confidence of the system.” But a cryptocurrency couldn’t improve security with a core update (Bitcoin Improvement Proposal), or more secure application factored in?
This is just a taste of the wisdom and entertainment inside. Desperate governments will do this. Build a “straw man,” or create a facsimile of the target with the same name, but misrepresent everything about that to the masses in a design of deception.
I haven’t read “Beyond Bitcoin,” but this paper does not speak very highly of any Bitcoin knowledge therein. Either it is a bad actor in the space, or these gentlemen didn’t understand it, or just threw it in there to show some form of fintech street cred.
All I can say is consider the source when you are getting information about Bitcoin and where it should go from here. This came across as a directive to make a case for centralizing control of Bitcoin, and the case was made pretty poorly because there really is no case.
The people paying their salaries wanted an outcome, and who cares if it makes sense or not? It’s not like the masses are going to read the fine print.
I didn’t get anything I didn’t already expect from a group of centralized banking employees. What else were they going to say about Bitcoin? That it is clearly better than any money Canada ever had?
If the Bank of Canada actually just copies Bitcoin’s blockchain and infrastructure in pursuit of their own digital currency, they’d probably be much better off than they are today. Make a CanadaCoin, copy the world’s greatest blockchain-based system, and enter the 21st century.
Just don’t try and justify manipulation of Bitcoin. You made a sand castle of an argument, and a tsunami of digital demand is rolling your way.
Do you agree with the authors of this paper? Share your thoughts below!
Image provided by Macleans.ca, Shutterstock