Money, Currency, Cybercurrency. Are they different?

Tomm Carr
6 min readDec 30, 2017


What, if anything, is the difference between money and currency? The simplest definition one may come across is that while both are a store of wealth and medium of exchange, money has intrinsic value and currency does not.

I have trouble with this definition, however, for two reasons. One, because there really is no such thing as “intrinsic” value. All value is subjective and subject to change according to changing times, context and whim or fashion. Second, the idea that currency has no value is historically recent. This is the definition of official or fiat currency, a phenomenon that occurred with the advent of central banking.

I would have preferred to specify that money has alternative or secondary value. A gold coin, for example, has value as a medium of exchange but it also may be melted down and used to make jewelry or any number of other items of value. A dollar bill or pound note has no such alternative source of value, it has only fiat value. That is, it has value only because a government or central bank has decreed it has value. So a gold coin is “money” and a dollar bill is “currency.”

While almost anything can have value, there are additional attributes of money — permanence, limited supply, fungibility, divisibility — that don’t apply to most other articles of value.

Then someone invented Bitcoin. Now the world of finance has entered a whole new — and interesting — era. Does Bitcoin have value? If so, is it suitable for use as money, currency, both, neither?

Bitcoin definitely has value. Something has value if a buyer and seller agree it has value — and, here’s an important point missing from most discussions, the buyer and seller don’t have to be involved in the same transaction. A seller can accept payment of their “object of value” with something which has no value to them at all. However, they know that other people value it so they accept it as payment in one transaction so they can use it as payment in a different transaction.

I, of course, come down firmly on one side of this issue of whether Bitcoin (or any cybercoin) is money/currency. But instead of putting forth my arguments for or against a particular side (I have done so already in other posts), I would like to critically examine the arguments put forth by someone from the “other” side.

Take this article, for example. Jan Smets is the current governor of the National Bank of Belgium (NBB). He also serves as a Director of the Belgian Institute of Public Finances and Bank For International Settlements, Director of the Deposits and Financial Instruments Protection Fund, the Study Group on Ageing (High Council of Finance), the OECD Economic Policy Committee, the Editorial Board of the International Journal of Central Banking, Member of the Financial Stability Committee and the Securities Regulation Fund Committee [source].

We can assume, then, that Mr Smets is familiar with the financial industry. However, he, as governor of a central bank if not well prior to that, is now a politician. Something strange happens to people when they become politicians. Their ability to reason seems to become stunted.

That, or they simply make the most categorical pronouncements of subjects they know absolutely nothing about.

“Let’s stop calling the bitcoin a coin.”

No one refers to Bitcoin as an actual coin. It’s an analogical reference — something software is rife with. Does he argue about “windows” or “text boxes” or “buttons”? Would he look at object-oriented code and argue, “There are no objects there!”? Is he wary of catching a computer virus?

“We need to warn people about the bitcoin, and people who invest in bitcoins can lose a lot.”

So, as an investment, Bitcoin has an amount of risk. Fine. How is this news? What investment carries no risk? Not even government securities are completely risk free. Some people have lost money investing in Bitcoin (or cybercurrency in general). Most people, however, have made money hand over fist. So much so we have had to invent the term “cyber-millionaire” and, yes, the term means exactly what you think.

Mr. Smets worries about the purchasing power of the decentralized currency, pointing to its lack of stable backing such as that which the euro has with its tether to the European Central Bank. Bitcoin’s price moving from 1,000 USD at the beginning of 2017 to around 15,000 USD only buttresses his argument, he believes.

My mind is thoroughly boggled. Anyone who invested 10,000 USD in Bitcoin at the beginning of 2017 would now have about 150,000 USD worth of purchasing power, an increase of 1400%. That same ten thousand put into Euros would now be worth about 11,430 USD, an increase of a little more than 14%. This is worrisome?

How much of a benefit has this “tether to the European Central Bank” been to investors who put their wealth into Euros? If the 1400% increase in the value of Bitcoin has buttressed his argument, what would it have taken to undermine his argument? One wonders.

“Unlike the euro, the bitcoin is not guaranteed by a central bank or government as a means of payment, so the bitcoin is not a currency.”

This is not the historic definition of a currency. This is the definition of a fiat currency. One would think that with Mr Smets extensive background in finance, he would know the difference. However, I will give him the benefit of the doubt as “currency,” in most cases, has been shorthand for “fiat currency” for the last century and perhaps he dropped the “fiat” out of habit.

Or perhaps he is not aware of the changes that are taking place in the financial world. There are some subtle changes that have taken place (or will soon take place) regarding the definitions. Here are the new definitions:

Money is anything that has value and may be used as a store of wealth but is generally used as a medium of exchange. So while fine art, real estate and precious metals in bullion form may have a great deal of value, they are used more as a store of wealth rather than a medium of exchange. They may be exchanged, of course, but the overhead or “friction” of exchanging them are too high to make them practical as mediums of exchange. Precious metal coins, paper instruments backed by precious metal bullion, and cybercoins are also stores of wealth and their exchange overhead is low enough to be useful mediums of exchange. Money that is a practical medium of exchange for day-to-day use is currency.

Included as currency is fiat instruments (legal tender). However, note that fiat instruments are not money because they are not good stores of wealth. The most stable of these currencies has been the US dollar (federal reserve note). But $100 of wealth “stored” when the federal reserve notes were first issued (1914) would be worth only about $4 today. If this is what happens with the best of all fiats, it is obvious that fiats are a destroyer of wealth, not a store of wealth.

Cybercurrencies have, so far, been excellent stores of wealth and also good generators of wealth. As they achieve more acceptance, however, the “generator of wealth” effect should decrease along with their price volatility. However, the deflationary nature of most of these coins assures they will ever remain a good store of wealth.

Cybercurrencies have not yet achieved widespread acceptance as money, much less currency. This is understandable. Gold and silver have been around for millennia and are universally accepted as the gold standard <cough> of a safe store of wealth. Fiat currencies are accepted because it is illegal to do otherwise. Cybercurrencies have a long, tough row to hoe and a few bugs yet to iron out, but the future looks bright. Bitcoin is now listed in the US futures market (CME). This will also tend to reign in the price volatility. In fact, Bitcoin has received favorable treatment in several countries and there seems to be few true obstacles remaining.

Since cybercurrencies are an excellent medium of exchange and excellent store of wealth while fiat currencies are a good medium of exchange and horrible store of wealth, it is not difficult to imagine the future of fiat currencies and the central banks that foist them on the populace.

This means people like Jan Smets will finally have to out and get a real job.

Which may be the most thrilling aspect of all.



Tomm Carr

A retired software engineer who hates retirement with a passion. My hobbies are economics, philosophy and futurism.