I’ve always said that the digitisation of money is set to transform how we go about our daily lives. However, Bitcoin is a phenomenon which has certainly divided opinion and caused interesting debates. Let’s face it, in bypassing the monetary system, authorities will inevitably crack the whip where they can to prevent potential illicit activities. We saw the latest victim last week, with payments processor OKPay suspending all exchanges due to mounting pressure by US regulators. Previously, Dwolla shut its doors to the Bitcoin payment ecosystem.
I do see an interesting parallel with the rise in digital music. Napster was dramatically shut down by regulators, but other digital evangelists realised the potential for the music industry, and eventually music sharing became mainstream. As financial services continue to turn to digital innovations, there is the possibility that Bitcoin started the industry on its journey towards pure digital services, but being the first to champion the cause became its downfall.
Now that the US is consciously evaluating Bitcoin processing, will we witness a domino effect? How can Bitcoin be successful now that the US has it in for Bitcoin exchanges? Realistically, any international financial systems that trade with the US (of which there are obviously many) are likely to encounter trouble, limiting the value Bitcoin can bring in the future.
Its evangelists claim we will be using Bitcoin in the future as the world’s universal currency. However it’s the equivalent of stating the world will eventually speak in a universal language. Bitcoin describes itself as a digital currency that works in every country with no chargeback fees, however it has its limits when considering what can be traded or purchased using Bitcoin currency. Fiat currency still remains the norm when purchasing goods and services, and converting Bitcoins into hard currencies results in the usual exchange fee.
We may soon see the effects of the US’ continued crack down on Bitcoin trading in other financial centres. It’s frustrating to see regulation forcing Bitcoin into extinction, when at the same time, we are constantly having futuristic conversations about the digitisation of cash – an instrumental part of our economic system in need of a virtual makeover. I’m optimistic that the value Bitcoin has brought to the financial innovation circuit has spurred other FinTech challengers to deliver solutions which will eventually transform our monetary system. There is definitely room for a virtual currency in our future, but we’re not quite there yet.