Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Caitlynn Childress
Business Law II
TR 9:30-10:45
Bitcoin: The Untouchable Currency
In the United States, who controls and regulates the money supply that
exists for you and all other people today? The answer is the U.S. Federal
Reserve System, or what is generally referred to as the Federal Reserve. As the
central bank of America, this financial institution provides our country with
monetary policy and the stability to support the United States and its people
economically. With many regulations implemented on the requirements, usage,
and rights related to currency, the Federal Reserve System is able to toil hard
and financially support the people of America. However, what does such an
economy do when a vast amount of individuals start investing in a virtual, non-
governmental regulated currency? This is the question sprouting in many
countries as the virtual currency, commonly known as “Bitcoin,” begins to
increase in popularity throughout the monetary system. The foremost question
asked is: will the government be willing to accept changes in traditional money
use? Bitcoin is a large step in the advancement of currency and its existence
should be spread and acclaimed throughout the monetary world; however,
certain adjustments and regulations must be created to resolve problems within
the virtual currency in order to implement safe public use.
To begin, it is important to understand how traditional currency is used and
has been exchanged throughout history. Over the past three centuries, the
United States of America has experienced numerous transformations and
modifications to its financial system. With each transformation over time, it is also
critical to note that the United States changes, in order to adapt to the new
circumstances, and becomes accustomed it, which will be further discussed later.
The first serious learning experience with currency took place in 1775,
when “American colonists issued paper currency for the Continental Congress to
finance the Revolutionary War, but without solid backing and because they were
easily counterfeited, the notes quickly became devalued” (“U.S money history”
2007) and made almost worthless.
Another important development in the history of money in the United
States was the creation of the Gold Standard Act 1900. For centuries, gold has
been one of the most valuable ores to mankind, which even today can be easily
accepted or traded across the globe. The gold standard created in the United
States, “Put simply, is a monetary system under which the economic unit of
account is based on a fixed quantity of gold. That means paper currency notes
are convertible directly into specific quantities of gold” (Writer, 2014). Most
importantly, in the history of gold standards, “On March 14, 1900 the United
States congress passed an act that standardized the value that brought parity
among all forms of currency issued by the United States” (Vikas, 2014).
“Important benefits of this Gold Standard Act were to fix the value of gold and
silver, as United States notes could be redeemed for gold” (Vikas, 2014). The act
not only aided the United States in creating a standard value for gold, but “In a
way this act helped form an international exchange rate, causing the value to
soar around the world and because of the exchange of gold and currencies
among countries grew in the process, trade agreements were established”
(Vikas, 2014).
This, in turn, taught Americans that money needed a value and an
authorized structure to distribute money. Thus, came the creation of the nations
first bank where “Continental Congress charted the Bank of North America in
Philadelphia as the nation’s first “real” bank” and later, “adopted the dollar as the
unit for national currency” (“U.S money history” 2007), which still exists today.
Almost a century later, in 1863, came a new design to further the enhancement
and expertise of innovative currency. “The design of U.S. currency incorporated a
Treasury seal, the fine-line engraving necessary for the difficult-to-counterfeit
intaglio printing, intricate geometric lathe work patterns, and distinctive cotton
and linen paper with embedded red and blue fibers” (“U.S money history” 2007).
Fourteen years later, adding further to the enrichment of currency, “The
Department of the Treasury’s Bureau of Engraving and Printing started printing
all U.S currency” (“U.S money history” 2007), and continues to do this today.
Lastly, perhaps one of the most important acts after many financial frights, “On
December 13, 1913, President Woodrow Wilson signed the Federal Reserve Act
establishing the Federal Reserve System” (Young, 1963) in the United States.
“The function of the Federal Reserve System is to foster a flow of credit and
money that will facilitate orderly economic growth, a stable dollar, and long-run
balance in our international payments” (Young, 1963). Young (1963), also states
“The administration of monetary policy and other Federal Reserve functions is
carried out through the Federal Reserve System, which includes twelve Federal
Reserve Banks, the Board of Governors in Washington, and Federal Open
Market Committee” (pg.15). Today, the system of the Federal Reserve is how the
United States generally understands the way in which money is regulated and
put into use in the economy.
However, as previously mentioned, the introduction of Bitcoins also brings
with it a major sense of change in the history of traditional use of currencies
across the world. Perhaps the most palpable difference with Bitcoins and
traditional currency is that Bitcoin is a virtual currency. Additionally, “Bitcoin is not
backed by the U.S Government or any other legal institution, is a digital rather
than paper currency, storable on electronic media, and transferable over the
Internet” (Grinberg, 2012). “Bitcoin is the leader in a new generation of emerging
