Finland’s central bank, the Bank of Finland, has become the latest monetary authority to highlight the opportunities inherent in bitcoin, crediting the currency’s ‘revolutionary’ potential.
A paper published by researchers at the bank looked at the structure of bitcoin, including the technological infrastructure supporting the technology, which was described as a ‘monopoly run by a protocol’.
The paper was set up to examine the inner working of the currency, and to help foster greater understanding amongst staff, to equip the bank to better respond to the opportunities and challenges created by digital currencies like bitcoin.
Pertinently, the report’s authors highlighted the intrinsic structures of bitcoin that protect the markets against so-called ‘bad actors’, thanks to the protocol-layer structures powering the network.
The paper goes on to argue that attempts to regulate bitcoin, for these reasons, will prove futile – a position supported by many cryptocurrency analysts, in spite of growing legislative attempts around the world.
According to the report, bitcoin shares several key characteristics with ‘familiar monopolies’, despite its immunity to government regulation.
“Bitcoin is a monopoly run by a protocol, not by a managing organization. Familiar monopolies are run by managing organizations with discretion to determine and then change prices, offerings and rules. Monopolies are often regulated to prevent or at least mitigate their abuse of power…Bitcoin cannot be regulated. There is no need to regulate it because as a system it is committed to the protocol as is and the transaction fees it charges the users are determined by the users independently of the miners’ efforts.”
While the research paper has been presented as the opinions of the authors, rather than reflective of the wider Bank of Finland, their findings are notable in the context of the bank’s previous efforts around the technology.
Finnish city Kouvola has been one beneficiary of the bank’s interest in this emerging space, receiving €2.4 million towards testing and developing blockchain powered solutions for the shipping space.
Similarly, the bank has been proactive in arranging seminars and conference events to discuss bitcoin and the underlying blockchain technology, with a view to identifying opportunities for the near future based on the protocol.
By working with regulators, academics, startups, banks and the Finnish government, the central bank seems more committed than ever to assisting in the development of this emerging technology.