In a report published on 10 May, the US Congressional Research Service (CRS) – the public research arm or think tank of the United States Congress – found that bitcoin usage is miniscule compared to traditional non-cash payment systems such as credit, debit, Venmo, Apple Pay and check payments.
The CRS discovered that while demand for cash in the US is steadily growing, its usage for payments is declining – but despite this trend, people have yet to turn towards bitcoin as an alternative like industry insiders may have hoped.
“To date, the migration away from cash has largely been in favour of traditional non-cash payment systems; however, some observers predict new alternative systems will play a larger 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 aim and involve costs of their own.”
“Private systems using distributed ledger technology, such as cryptocurrencies, may not serve the main functions of money well and face challenges to widespread acceptance and technological scalability,” the report found.
The report also said that the price of bitcoin does not accurately reflect its overall demand. The CRS looked at how many times bitcoin is transferred per day and found that the number of transactions were “miniscule” compared to other, more traditional systems.
For example, in 2019 through 12 March “the bitcoin system averaged about 310,000 transactions per day globally, a pace that would result in about 113 million transactions per year”, while over US$144 billion traditional non-cash payments were made in 2015, almost 1,275 times the average number of yearly bitcoin transactions.
Researchers described this as a measure of the number of times that two parties have exchanged bitcoin; this kind of data does not tell us how many times bitcoin has been used to buy something.
“Some portion of those exchanges, possibly a significantly large portion, is driven by investors giving fiat currency to an exchange to buy and hold the Bitcoin as an investment. In those transfers, Bitcoin is not acting as money (i.e., not being exchanged for a good or service),” the report said.
The CRS said that it found it difficult to envision an economy where cash had been replaced, at least in the near future, but conceded that cash’s “hegemony as a payment system appears to have come to an end,” and that the ubiquity of its acceptance in the real-world seems somewhat precarious.
“If non-cash payment systems significantly displace cash and cash usage, and acceptance significantly declines, there would be a number of effects (both positive and negative) on the economy and society,” the CRS warned.
“Now or in the near future, policymakers may face decisions about whether to impede or hasten the decline of cash and consider the implications of doing so,” it added.