North American Bitcoin Conference Review: Is Bitcoin Suitable as a Reserve Currency?

On January 21 and 22, Eastern Time, the North American Bitcoin Conference (TNABC) was held in Miami, Florida. BTCC CEO Bobby Lee delivered an important speech at the conference titled "Is Bitcoin Suitable as a Reserve Currency?" Under the premise that the stock market in many countries such as the United States continues to be sluggish and energy prices are falling, the content of this speech has attracted much attention. Bobby Lee deeply explained the characteristics of Bitcoin as a reserve currency. He also cited many examples and metaphors to make it easier for people to understand.

In his speech, Li Qiyuan defined theoretical money and explained the difference between theoretical money such as Bitcoin and gold and legal tender. He then explained how reserve currencies help stabilize the value of legal tender and why Bitcoin is an ideal reserve currency.

In theory, money should be recognized by the public, Li Qiyuan explained. It should be a widely accepted means of storing value, and it should be easy to transfer and easy to maintain. In theory, money also has the characteristics of easy transfer, difficult to counterfeit, and can be forged into small denominations. Other attributes include being difficult to obtain and having a stable supply.

Take gold as an example. It has all the characteristics of money in theory: it is portable, recognizable, difficult to counterfeit, can be forged into small denominations, etc.

In contrast, fiat money is a legal concept; the government defines what is and is not money. Only some of the money is legal tender. Fiat money differs from theoretical money in several important ways: it does not hold value, has an unlimited supply, is printable by the government, and has an unstable supply.

Reserve currencies have many of the properties of theoretical money, so governments use reserve currencies to maintain the value of their national currencies. Like an anchor that holds a ship in the ocean, reserve currencies are anchors for unrestricted fiat currencies. Governments use them to peg fiat currencies to balance and ensure that fiat currencies do not depreciate too quickly. For example, when a country's currency depreciates, the government of that country can support the exchange rate of its currency by using reserve currencies or reserve assets (gold) to buy its own currency in the foreign exchange market.

Bitcoin can theoretically be used as a reserve currency because it meets all the characteristics of money in theory and can be transferred across borders in a timely manner. In addition, because Bitcoin is decentralized, if Bitcoin is used as a reserve currency, it will bring about a more fair and just global economic system, because no country can determine global economic policies by having a dominant reserve currency, such as the current United States.

In general, fiat currencies lack some of the characteristics of theoretical money: they have an unlimited supply, are relatively easy to counterfeit, and have an unlimited supply determined by the central bank. Bitcoin, like gold, has all the characteristics of theoretical money: a limited supply, cannot be counterfeited, and has a stable and predictable supply. Therefore, Li Qiyuan believes that Bitcoin is a perfect choice for a reserve currency, especially for balancing fiat currencies. Recently, the People's Bank of China announced that it will investigate the intention of digital currency for China. Details are still in progress. Will it become the new digital reserve currency? Or, will it need a digital currency like Bitcoin to support it?