On a report published on May 10, the US Congressional Research Service (CRS) – the public research arm or think tank of the US Congress – found that bitcoin usage is minuscule compared to traditional payment systems that are not cash like credit, debit, Venmo, Apple Pay, and check payments.
CRS found that while the demand for money in the US is steadily growing, its use for payments is decreasing – but despite this trend, people still haven’t turned to bitcoin as an alternative, as industry experts had hoped.
“To date, the shift away from cash has largely been in favor of traditional non-cash payment systems; however, some observers predict that new alternative systems will play a greater role in the future,” the report said. “Such alternative systems aim to address some of the inefficiencies and risks of traditional non-cash systems, but face obstacles to achieving that goal and involve costs of their own.”
“Private systems that use distributed ledger technology, such as cryptocurrencies, may not serve the core functions of money well and face challenges to widespread acceptance and technological scalability,” the report found.
The report also said that bitcoin’s price does not accurately reflect its overall demand. CRS analyzed how many times bitcoin is transferred per day and found that the number of transactions was “minuscule” compared to other more traditional systems.
For example, in 2019 through March 12, “the bitcoin system averaged around 310,000 transactions a day globally, a pace that would result in around 113 million transactions a year,” while more than $144 billion in traditional payments did not. Monetary transactions were made in 2015, nearly 1,275 times the average number of annual bitcoin transactions. Learn how to buy cryptocurrencies like Dogecoin.
The researchers described this as a measure of the number of times two parties exchanged bitcoin; this type of data does not tell us how many times bitcoin was used to buy something.
“Some part of these exchanges, possibly a significantly large part, are driven by investors giving fiat currency to an exchange to buy and hold Bitcoin as an investment. In these transfers, Bitcoin is not acting like money (i.e. not being exchanged for a good or service),” the report said.
CRS said it found it difficult to imagine an economy where cash would be replaced, at least in the near future, but admitted that the “hegemony of cash as a payment system seems to have come to an end” and that the ubiquity of its acceptance in the world real looks a bit precarious.
“If non-cash payment systems significantly displace cash and the use of cash, and acceptance significantly declines, there will be a range of effects (both positive and negative) on the economy and society,” the CRS warned.
“Now or in the near future, policymakers may be faced with decisions about whether to halt or accelerate cash declines and consider the implications of doing so,” he added.
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