Bitcoin has established itself as a significant force in the financial world, hailed by some as the future of money and dismissed by others as a volatile experiment. Economists, academics, and financial institutions have studied the possibility extensively, with arguments both for and against.
While Bitcoin has already proven its viability as a store of value and medium of exchange in certain contexts, the question remains: Can Bitcoin become a unit of account?
To answer this, we need to first understand what a unit of account is, weigh the arguments for and against Bitcoin’s potential in this role, and explore what such a transition might look like in the real world.
What is a Unit of Account?
A unit of account is a standard numerical monetary unit used to measure and compare the value of goods and services. It allows individuals and businesses to price products, record debts, keep financial records, and evaluate costs and profits.
Let’s say a loaf of bread costs $2, or a car is worth $25,000; we are using the dollar as a unit of account. It acts as a common language for value across the economy.
A reliable unit of account must have the following qualities:
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Stability: Minimal fluctuation in value over time.
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Widespread acceptance: Used broadly across a population.
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Consistent purchasing power: Reflects value accurately in economic transactions.
Why Bitcoin Is Not a Unit of Account, Yet
At present, Bitcoin is rarely used as a unit of account. Prices are almost universally quoted in fiat currencies; USD, EUR, JPY, etc., even when Bitcoin is accepted for payment. Retailers who accept BTC still display prices in dollars or euros and convert them at the point of sale.
There are several reasons for this:
Volatility
Bitcoin is highly volatile. Its value can fluctuate by thousands of dollars in a single day. This makes it challenging to use as a stable benchmark for pricing goods or services.
A stable unit of account must be predictable enough for people and businesses to plan long-term. According to a 2022 report by the Bank for International Settlements (BIS), extreme volatility makes Bitcoin less effective for economic calculation compared to traditional fiat currencies.
Limited Use in Daily Transactions
While Bitcoin is increasingly accepted for payment, it’s still used by a minority of businesses globally. A 2023 study by the European Central Bank found that fewer than 2% of merchants in the EU accept crypto. Without broader adoption, it can’t serve as a pricing standard.
Accounting Standards and Legal Frameworks
Current accounting systems and tax laws are denominated in fiat currencies. Businesses are required to report earnings, expenses, and taxes in legal tender. For Bitcoin to become a unit of account, legal and regulatory changes would be needed on a large scale.
The Case for Bitcoin as a Future Unit of Account
Despite the hurdles, some economists and crypto advocates believe Bitcoin could eventually serve as a unit of account, especially in specific use cases or regions.
Hyperinflation and Currency Instability
In countries facing severe inflation (e.g., Venezuela, Zimbabwe, Argentina), citizens often look for alternative stores of value and pricing units. In such cases, Bitcoin can act as a more stable reference point than the national currency.
Increased Adoption and Layer 2 Solutions
As more people and businesses adopt Bitcoin, and as scalability solutions like the Lightning Network reduce transaction costs and increase speed, Bitcoin’s utility could expand.
According to research by the MIT Digital Currency Initiative, if Bitcoin becomes easier to use, faster, and cheaper, its integration into pricing systems might follow naturally.
Speculative Integration in Digital Platforms
One plausible future is a dual-pricing system. Just like some websites display prices in USD and EUR for convenience, we might see BTC prices displayed alongside fiat.
This doesn’t necessarily mean Bitcoin replaces fiat; it could coexist as a comparative pricing metric, particularly for digital-native buyers and sellers, or in global online markets.
What Would a Bitcoin-Based Unit of Account Look Like?
Life with Bitcoin as a unit of account would need us to rethink our daily transactions. A Bitcoin-based system would use satoshis (or “sats”) – the smallest Bitcoin unit. 100 million satoshis make up one Bitcoin. This level of division lets us price anything from luxury cars to candy bars.
Decimal places pose the biggest practical challenge. A $2 candy bar would cost 0.00001333 BTC or 1,333 satoshis when Bitcoin trades at $150,000. Current accounting systems only work with two decimal points, not the four or five that Bitcoin needs. Users find this hard to handle.
Bitcoin’s price swings give merchants a tough time because they need to update prices as Bitcoin’s value changes. Picture yourself changing every price tag in your store several times a day. Bitcoin also trades at different prices on various exchanges, which makes pricing even harder.
A “Fractionalized Composite Money” system might solve these issues:
- Suppliers price goods in satoshis worldwide to make Bitcoin the universal standard
- Customers pay using different digital currencies or stablecoins
- Smart contracts and decentralized exchanges handle conversions between payment currencies and Satoshi prices
This system helps merchants deal with value differences between invoice and payment times.
Bitcoin’s limit of 21 million coins makes it great as a unit of account. It removes the distortions that plague regular currencies due to inflation. This could lead to a more straightforward, more stable way to measure value as time passes.
Bitcoin as a unit of account would surpass national borders and could make global trade simpler by creating a universal economic language. We might measure all economic value in satoshis instead of converting between dollars, euros, and yen. Yet many practical challenges stand between us and this future reality.
Could It Happen?
So, can Bitcoin become a unit of account? The short answer: Not yet, but possibly in the future. Bitcoin’s path to becoming a unit of account hinges on broader adoption, increased price stability, and infrastructure overhaul. The roadblocks are real, but not insurmountable.
In a hybrid model, we may first see BTC complement fiat currencies rather than replace them. Prices could be listed in both BTC and fiat on websites.
Over time, in certain regions or industries, BTC might emerge as a standard pricing reference, especially where fiat is unstable or where crypto-native systems dominate.
It’s a long-term vision, but one that’s worth watching closely.
