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The Difference Between Currency and Commodity: How Countries Approach It
Let’s simply put it this way to start: we spend a currency to purchase things in daily life, whereas when it comes to commodities, we treat them as valuable goods, sometimes even as investment assets. But when it comes to cryptocurrencies, things get very interesting, because although they are currencies in nature, they may have a different perception.
So, this article dives deep into the topic to uncover more. One important thing to keep in mind: what is considered a commodity today can become a currency tomorrow. The rest is in the article below.
Cryptocurrency: A “Currency” Treated as a Commodity
Cryptocurrencies (like Bitcoin and Ethereum) present a fascinating modern case of the currency-vs-commodity debate. Although the word “currency” is in their name, many countries do not treat cryptocurrencies as currencies in the traditional sense. In fact, the vast majority of countries (with only rare exceptions) do not recognize cryptocurrencies as a fiat currency – instead, crypto is usually viewed as an asset or commodity, similar to property or stocks.
There are a few notable exceptions where crypto is approached more like a currency, and one is El Salvador that made headlines in 2021 by becoming the first country to adopt Bitcoin as legal tender, meaning it’s an official currency there alongside the US dollar. By and large, however, El Salvador is the outlier – most countries prefer to keep cryptocurrencies in the category of investable commodities or assets, not everyday money. But it is not all about investment, as industries like online gambling showcase another aspect of the usage of crypto.
In fact, cryptocurrency casino platforms treat Bitcoin or other coins essentially as chips or credit for play. Technically, when you send crypto to an online casino, you are leveraging blockchain transactions instead of traditional banking. This comes with several financial advantages. Speed and efficiency are a major benefit – cryptocurrency transactions are processed quickly on the blockchain without needing bank clearance, enabling near-instant deposits and cashouts for players.
Users of crypto gambling sites also enjoy greater anonymity. Unlike credit card payments that require personal details, crypto transfers link only to digital wallet addresses, allowing players to play without divulging sensitive personal or financial information. All these factors make cryptocurrency a desirable payment method in the online casino world, even while it’s not used at the grocery store. In essence, global digital services like gaming, gambling, and other online marketplaces have embraced crypto as a payment method of convenience, blurring the lines of its official status. People are using crypto in these spheres because it provides fast, borderless, and decentralized transactions, keeping crypto in circulation and giving it practical utility despite its commodity-like treatment in mainstream economies.
What Makes a Currency Different from a Commodity?
The divergent treatment of crypto highlights a fundamental question: what truly distinguishes a currency from a commodity? In economic terms, a currency is defined by its function. As noted earlier, money serves as a medium of exchange (universally accepted for payment), a unit of account (a measure by which prices and values are quoted), and a store of value (it can hold value over time). Commodities, in contrast, are tangible (or digital) goods that have intrinsic value and are mostly used as inputs or resources – they might be consumed (like oil burned for energy, or wheat milled into flour) or used to manufacture other goods. Commodities are typically traded in markets for their utility or as investments, but you wouldn’t ordinarily price your everyday shopping list in barrels of oil or bushels of wheat.
Central banks can print and control fiat money, and if managed well, it stays fairly stable, which makes it useful for everyday spending. Commodities, on the other hand, can have big price changes depending on supply and demand. For example, oil prices can jump if there’s a supply cut, or gold can rise when people are worried about the economy.
So where does something like Bitcoin fit? Interestingly, Bitcoin and similar crypto assets have characteristics of both. They are tradable and limited in supply like commodities, yet they were envisioned to serve as a decentralized currency. In practice, as of today, they behave more like commodities or investment assets. Many holders treat crypto as a speculative store of value rather than a day-to-day money.
As analyses usually point out, there are several reasons why mainstream cryptocurrencies don’t fully qualify as currencies: for one, they are not widely used as a medium of exchange (not legal tender in most places and accepted by only a small number of merchants), and their well-known price volatility makes them impractical as a stable unit of account. Until those factors change, it’s accurate to say that crypto is “currency in name, commodity in nature” from an economic standpoint.