Five for Friday: Five reasons cryptocurrencies are here to stay
Mention cryptocurrencies to most ordinary investors and they’ll probably tell you they wouldn’t touch them with a bargepole.
Valuations for the new form of digital cash have soared and plunged with stomach-churning regularity over the past few years, and they are perhaps rightly viewed as highly risky, unproven, vastly unregulated and frankly dangerous in some cases.
The industry is reeling from news this week that investors may have lost as much as $190 million worth of crypto and other assets after Gerald Cotten, CEO of Canada’s biggest crypto exchange, Quadriga, died suddenly while travelling in India.
His death was tragic enough, but in a bizarre twist, the company said that Cotten was the only person who had access to the vital codes to the offline accounts, called ‘cold wallets’, where the digital currencies were stored.
But even this heart-stopping misadventure isn’t likely to spell the end for digital cash and here’s five compelling reasons we think cryptocurrencies, like a Celine Dion anthem, will go on and on…
Billionaires at the big table
From Twitter founder, Jack Dorsey, to the Winklevoss brothers - the twins who famously sued Mark Zuckerberg claiming he stole their idea for FaceBook - a lot of very rich people are invested in the crypto world and they’re unlikely to let it just go boom.
Indeed, Dorsey, who set up finch firm Square, which allows people to buy and sell bitcoin via its Cash app, is on record as saying that bitcoin will one day become the single global currency.
And, as reported by Prolific London on Thursday, global social media giant, Facebook, has just 'acqui-hired' the talented team at London blockchain startup, Chainspace, confirming long standing rumours of FB's interest in the crypto market.
Regulators playing catch up
Every time something new is invented it’s only a matter of time before governments step in and attempt to regulate it. They’re always behind the curve and playing catch up, but countries are stepping up policing of crypto.
As we reported on Prolific London, the UK’s financial regulator, the Financial Conduct Authority, recently approved B2C2 OTC to act as a cryptocurrency liquidity provider, in London. It wasn’t the first one ever, but it shows that some of the world’s leading financial watchdogs are sitting up and taking notice.
This week alone Philippines regulator, the Cagayan Economic Zone Authority, issued a set of rules and guidelines in a bid to regulate the market and protect investors; and a gold-backed cryptocurrency called “PayMon” was reportedly been launched in Iran.
Expect to see more regulators clamber on board this year.
Institutional players circling
The cryptocurrency world is packed with small indy investors looking to strike gold, but the world’s big brands in financial services are moving in. Last autumn, Fidelity launched Fidelity Digital Assets, making it the first Wall Street firm to offer cryptocurrency services to investors.
Moreover, Goldman Sachs, has been reported as looking closely at the blockchain - the ledger system technology that cryptocurrencies run on, as a possible entry point. Although last year it ditched plans to open a crypto trading desk until more regulation was in place.
HSBC may not be jumping in with both feet, but one of the world’s leading banks is chest high in the digital cash world. In January it was reported that it had settled more than $250bn in trades using the Distributed Ledger Technology - the blockchain we mentioned earlier - that cryptocurrencies use.
And it was reported last month that Belarusbank, the largest bank in, well, Belarus obviously, was considering opening up a cryptocurrency exchange. the bank’s chairman, Viktor Ananich, was quoted as saying that digital currency was one of the most important focuses of the bank for the coming year.
You might be able to buy and sell hundreds of cryptocurrencies online, but good luck trying to buy a pint with crypto cash down your local pub, or a dine-in-for-two meal deal at your local M&S.
However, big consumer names are beginning to look into using cryptocurrencies or the blockchain ledger system for other parts of their operations.
According to Forbes.com, Ford Motor Company, Facebook, Daimler AG, Samsung, Toyota and even Walt Disney are among the big global consumer names developing systems for their logistics, suppliers and production operations. This is likely to follow into the consumer facing side of the business eventually.
They say necessity is the mother of invention. And while cryptocurrency has been accused of being a shady business, the system that it runs on, the blockchain, is being seized upon to change the way business is done across almost every industry.
From supply chain management and accounting to greater quality assurance, more transparent production lines and even fairer voting systems in elections blockchain’s potential is potentially huge.
Developers in more than 100 countries are working on new blockchain systems that can do everything from automating tasks to providing document authentication in industries like healthcare, property and law.
In January Wired magazine reported that the World Wildlife Fund (WWF) backed a blockchain-based platform, called OpenSC, “that can follow a fish caught in sub-Antarctic waters right from the moment it’s caught to the moment it lands on your plate.”
The UK is set to lead the field in Europe where blockchain technology is concerned. Last year 11% of all global patents filed with the World Intellectual Property Organisation were from the UK - ranking it fourth in the world. Moreover, no other country in the European Union made it into the top ten.
The biggest filer of global blockchain patents last year was nChain, a blockchain-focused research firm based in London and Vancouver.