The Federal Reserve Bank of St Louis, one of 12 regional Reserve Banks that make up the United States’ central bank, has conducted a study asking some of the biggest questions in cryptocurrency today – and they may have found some real answers.
Their researchers investigated the control structure of various currencies and looked into whether central banks will adopt cryptocurrencies as a form of payment. In an effort to assign Bitcoin one of the above monetary categories, the researchers concluded that Bitcoin actually defied traditional categorization – it’s none of the above, as shown in the chart below.
There are a number of dimensions used by the bank to categorize money. The first is representation: Is the currency represented physically or virtually? The second is transaction handling: Are transactions handled in centralized or decentralized payments?
The third is money creation: Is the production of the currency competitive or monopolized? These dimensions make it easy to distinguish between commodities like gold, physical currencies like fiat cash, and so on. However, Bitcoin proved elusive when analyzed in the traditional manner.