Pure Gold: Citibank Report says Bitcoin is 'Fiat Currency'

Ahead of Switzerland’s gold referendum this weekend, Citibank has a released a report publicly criticizing both the metal and Bitcoin – with some content being so embarrassing it could be satire.
Ahead of Switzerland’s gold referendum this weekend, Citibank has a released a report publicly criticizing both the metal and Bitcoin – with some content being so embarrassing it could be satire.

Ahead of Switzerland’s gold referendum this weekend, Citibank has a released a report publicly criticizing both the metal and Bitcoin – with some content being so embarrassing it could be satire.

The report, which joins the Swiss National Bank’s (SNB) earlier efforts to present gold in an unfavorable light ahead of the referendum, adds statements about Bitcoin and argues the “social superiority” of paper fiat money.

Created by research analyst Willem Buiter, “Gold: a six thousand year-old bubble revisited” also contains in its preface remarks such “Bitcoin is a fiat virtual peer-to-peer currency (without intrinsic value)” and “Gold and Bitcoin are costly to produce and store”.

The description of Bitcoin as “fiat” is perhaps the first to come from banking circles, fuelling speculation that the report is indeed designed to assist the ‘No’ campaign for the referendum.

The decision at stake is that of the Save Our Swiss Gold initiative, which if successful would require the SNB to repatriate its gold reserves, store 20% of currency reserves as gold and install a ban on further gold sales. As Smaulgld notes, this would effectively end the practice of central banking in the country.

“The initiative is not in Switzerland's interest because it wants to fundamentally change the rules of our monetary policy,” SNB Chairman Thomas Jordan told Swiss newspaper Neue Zuercher Zeitung earlier this month.

A ‘yes’ vote would, he added, cause the SNB to have to acquire approximately 70 billion Swiss francs’ (US$72.4 billion) worth of gold, and risks destabilizing the franc’s exchange rate.

“It would be disastrous if Switzerland limited its own capabilities to react to disorder and maintain the stability of its currency,” he said, adding in an interview with Blick newspaper that “the minimum exchange rate is central at present in order to fulfill our monetary mandate.”

Citibank’s statements strike an altogether different tone. The sheer brazenness of the language used in its report, however, invites doubts as to its effectiveness – and whether it could even backfire among audiences knowledgeable of the space.

“[Bitcoin] has no significant remaining uses as a producer good – equivalent or superior alternatives exist for all its industrial uses,” Buiter asserts, also voicing concern over not being able to trust authenticity of gold or digital currencies.

He writes:

“Counterfeiting (gold-painted lead ingots) are of course a risk (as it is with paper currency and, for all we know, with Bitcoin).”

Meanwhile, repatriation of gold has already been witnessed by the Netherlands and France this year, while Russia has acquired over 150 tons in an effort to move away from reliance on the Western economic sphere.

Switzerland has ironically taken steps to uphold Bitcoin’s freedom within its borders recently, licensing Bitcoin operators and complying with data sharing pacts, which decrease the possibility of investors using the country as a tax haven.


Did you enjoy this article? You may also be interested in reading these ones: