Recently, two staffers at the New York branch of the Federal Reserve published a short tract provocatively entitled “Bitcoin Is Not a New Type of Money.” As someone who has used bitcoin for payments, savings and a means of wealth transfer for the last half decade, this was news to me. I was curious to find out what I had been using this whole time, if not money.

In the article, the authors, Michael Lee and Antoine Martin, first distinguish money versus the mechanism of exchange. No complaints there: Venmo isn’t money, it’s a means of moving money around. Same for SWIFT and Fedwire and PayPal and so on. The dollars circulating within those systems constitute the money. Then the paper gets into more tendentious territory, somewhat brusquely dividing money into “fiat money, asset-backed money, and claim-backed money.”

Fiat money, they tell us, “corresponds to intrinsically worthless objects that have value based on the belief that they will be accepted in exchange for valued goods and services.”

They explain that Federal Reserve notes suit this definition, as do Rai stones, Ithaca HOURs (a time-based local currency in New York) and Bitcoin. The authors also claim that gold coins sit in the “asset-backed money” category. Assets in this category “derive their value, at least in part, from the assets backing the money.” Gold coins are valuable “because it is possible to melt a coin and find someone who would like to use the metal for another purpose.”

If you are confused at this point, I don’t blame you. The authors seem to mischaracterize not only bitcoin, gold, and Rai stones, but they also rely on an ersatz definition of “fiat money” that is well outside the mainstream.

Full article here: https://www.coindesk.com/where-the-ny-fed-bitcoin-is-not-new-blog-goes-wrong