[Editorial] Bitcoin 'Frame War': The One Who Names Sets the Rules

What should we call Bitcoin? Some refer to it as decentralized currency, while others call it digital gold. There are those who evaluate it as a risky asset that fluctuates with interest rates and liquidity, and others who argue it is a safe asset sought during disruptions in the existing financial system.

Seventeen years have passed since Bitcoin's emergence, yet there is still no agreed-upon name. This is not due to a lack of understanding. The name we assign affects the rules regarding taxation, accounting, regulation, and institutional investment. What is currently happening is not merely a debate over asset classification; it is a war for the frame.

The decentralized currency theory questions whether Bitcoin can serve as a means of payment. The digital gold theory examines whether it can act as a store of value. The risky asset theory looks at how sensitive it is to interest rates and liquidity. The safe asset theory asks whether it is a refuge for funds during crises.

While these claims may seem different, they share a commonality: all seek to find Bitcoin's place within the existing financial market. They compare Bitcoin alongside stocks, bonds, gold, and the dollar to determine what it resembles most. Ultimately, the question is the same: "Where does Bitcoin fit among existing assets?"

This question alone does not fully explain Bitcoin's nature.

Bitcoin is undoubtedly an asset. It is traded in the market, its price is formed, it is recorded in corporate financial statements, and it is subject to taxation. There is no need to deny this. However, Bitcoin transcends being merely an asset; it is also a system. It is a currency network with rules for issuance, transfer, and verification.

Bitcoin does not have a central bank governor to determine its money supply, nor does it have a monetary policy committee that changes policies. The established issuance rules, public ledger, and decentralized network replace human discretion. It is designed so that no single country or corporation can arbitrarily increase the issuance or alter transaction records.

This is Bitcoin's 'neutrality.'

Neutrality does not mean it is outside the law and sanctions. Bitcoins held in exchanges can be frozen, and if private keys are compromised, they can be seized. Bitcoin is not entirely free from the laws and systems of the real world.

However, Bitcoin itself does not carry the creditworthiness of a specific issuer, the fiscal situation of a specific country, or the repayment promises of a specific corporation. It means it is not a currency tied to a specific jurisdiction. This does not imply there is no risk; rather, it indicates that control is not concentrated in one place.

This characteristic becomes more significant as geopolitical conflicts intensify. After Russia's invasion of Ukraine in 2022, the Russian central bank's foreign reserves were massively frozen. Regardless of the legitimacy of the sanctions, this incident demonstrated that even a country's foreign exchange reserves are not free from political risks when placed under another nation's financial network and laws.

Subsequently, several countries diversified their reserve assets and increased their gold holdings for a variety of reasons, including inflation, exchange rates, and geopolitical instability. However, a common awareness underlies these actions: it is not just about high-yield assets, but about having assets that can be practically used during crises.

The fact that Bitcoin has begun to be mentioned as a strategic asset at the national level is not unrelated to this trend. The United States has established a system for strategically managing Bitcoin held by the government through seizures and other means. There is no need to exaggerate this as adopting it as a central bank reserve asset or through large-scale new purchases. However, the fact that even the world's largest economy has started to treat Bitcoin as more than just seized goods or speculative products is not insignificant.

That said, this does not mean Bitcoin can replace all central banks. Central banks play the role of a lender of last resort during financial crises, manage payment systems, and are responsible for price and financial stability. The Bitcoin network does not have such functions.

The competition between Bitcoin and central banks lies elsewhere: in the question of what to trust for the credibility of currency.

The central bank system demands trust in human and institutional judgment. It acknowledges discretion to lower interest rates and adjust the money supply based on economic conditions. In contrast, Bitcoin demands trust in rules designed to be difficult to change. One is based on discretion, while the other is based on constraints.

When trust in monetary policy and fiscal management is high, Bitcoin's alternative value may diminish. Conversely, as monetary overexpansion, fiscal deficits, capital controls, and financial sanctions recur, the value of unchangeable rules increases. The dramatic fluctuations in Bitcoin's price over the past 17 years are not only records of speculative fervor but also records of how distrust in existing monetary systems has been valued in the market.

It is natural for the government to supervise Bitcoin as an investment product. It cannot ignore price volatility, market manipulation, money laundering, and investor harm. However, supervising risks and defining its essence solely as an investment product are two different issues.

If it is a product, it can be supervised. If it is a system, a strategy is needed.

Korea's Bitcoin policy has long started from 'suppressing speculation.' The need to calm an overheated market and prevent investor harm at that time is understandable. However, the frame created to explain a momentary market situation should not become the ceiling of a long-term national strategy.

Now, discussions have expanded beyond user protection to include corporate market participation, financial company custody, listed products, digital asset accounting and taxation, and stablecoin systems. Yet, Bitcoin, stablecoins, and various tokens issued by companies are still treated under the single umbrella of 'virtual assets.'

The structure is different, yet the name is the same, leading to regulatory mismatches.

Stablecoins hinge on the issuer's repayment ability and reserve assets. Tokens issued by companies must consider the business entity and governance structure. Bitcoin, lacking a central issuer, must evaluate network security, custody, and market volatility. Applying the same regulations to different potential risks cannot yield a sophisticated system.

This is not a call for the government to immediately buy Bitcoin. It is also not a demand to unconditionally allow pension funds and financial companies to invest. First, we must answer whether Bitcoin should be distinguished from general issuance tokens, under what conditions and limits companies and financial institutions can hold it, and how to differently assess the risks of direct ownership, custody, and spot-listed products.

If the identity is not defined, the tax system will be shaken, and accounting will be disrupted. Standards for institutional participation cannot be established. It is not that the market is too small to discuss. It is that discussions have not started because we cannot decide what to call it.

There is no need to believe in Bitcoin. However, not believing and not understanding are different.

If we call it 'speculation,' policies will struggle to go beyond enforcement. If we only call it a 'product,' strategies will not go beyond supervision. Acknowledging that Bitcoin is both an asset and a rule-based currency system is essential for establishing proper regulation and boundaries.

The name is not the result of a debate but the starting point of policy. The frame is the ceiling of policy. The one who names sets the rules.

If you lose in the frame, you will ultimately lose in the system.

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