Like anything else in life, opinions about bitcoin and cryptocurrencies abound. The headlines are always dominated by the increase or fall of its price and the debate rages on. The focus of these articles has now shifted away from blockchain the technology towards bitcoin the currency. Our focus is on the digital units of value that are being used by people in exchange for goods or services or other currencies, and whose price tends to swing wildly against traditional government-issued currencies. However, there are many sides and perspectives to bitcoin.
For Parisa Ahmadi, bitcoin is a life-changer. Parisa is an Afghan girl who was working as a blogger for an American arts group. She was paid in bitcoin in her electronic wallet. The company then opened an e-commerce site that allowed Parisa to buy her own laptop in bitcoins. To us, it sounds like a normal transaction just that bitcoin replaced money. However, the revolutionary aspect of bitcoin is that it allowed Parisa to buy her own laptop using her own money. In a patriarchal society like Afghanistan, women do not have access to bank accounts. Only a cryptocurrency such as bitcoin has the potential of integrating women from the emerging markets into the digital world.
Erik Finman is a 19-year old bitcoin millionaire. He started investing in bitcoins in May 2011 after receiving a USD1,000 gift from his grandmother. Bitcoins potential to transcend the financial system was what motivated him to invest in bitcoins. Today, his fortune runs into millions.
In an interview a couple of weeks ago, Bill Gates Bill Gates threw his hat into the ring with other crypto coin sceptics, saying that virtual currencies are killing people in a "fairly direct way" because of how they're used to fund terrorism and to buy fentanyl and other dangerous drugs.
Bank of England Governor Mark Carney tore into bitcoin and other cryptocurrencies in a speech a couple of days ago and warned that the digital currency could be heading towards a "pretty brutal reckoning." European Central Bank Board Member Yves Mersch said last month the market is held up by investors who "believe they will find a greater fool to sell to before the inevitable crash."
The United Nation's World Food Programme (WFP) was designed to direct resources to thousands of Syrian refugees by giving them cryptocurrency-based vouchers that could be redeemed in participating markets. The platform was successfully used to record and authenticate transfers for about 10,000 individuals and gave them access to financial resources which traditional banks would have not.
Former IMF chief economist and Harvard University professor of economics Ken Rogoff believes cryptocurrencies will eventually be regulated and issued by the government. He thinks they will follow the same trend as standard coinage and paper currency where the private sector invented it, but the government regulated it and took it over.
Because of its rapid price rise and even faster declines, high-profile missteps or scams and passionate or sect-like legions of believers or critics, bitcoin has inspired heated debate detracting serious efforts to explain it and its potential. Its importance and use are increasing as shown by the efforts to regulate it such as in Malta. Bitcoin is still an experiment or a project in progress. Although we cannot predict its success or adoption, we can examine its prospects and its challenges. The story of bitcoin spans across countries and continents from offices in Silicon Valley to schools in Afghanistan to start-up sin Kenya and refugee camps in Finland to the corridors of regulators across the globe. It is also the story of a generation that wants to move away from a system to centralised trust to something which is open and transparent in nature. In the coming weeks we will delve into this story and try to figure out where cryptocurrencies fit into the world.
JP Fabri is the Managing Director of ARQ Economic & Business Intelligence, a specialised unit forming part of ARQ Group (www.arqgroup.com).