Bitcoin spins into wider currency as banks brace for major change

Barriers such as faith in fiduciary issue, control and money-laundering are being overcome

Taoiseach Enda Kenny,with Colm Lyon, CEO Realex Payments. Photograph: Alan Betson

Taoiseach Enda Kenny,with Colm Lyon, CEO Realex Payments. Photograph: Alan Betson

Thu, Jul 3, 2014, 01:00

Nicolas Cary receives 100 per cent of his salary in bitcoin. Then again, he is the chief executive of the world’s most popular bitcoin wallet service, Blockchain.info.

His company’s web wallet service has more than 1.7 million users, and has processed almost $20 billion worth of transactions. It’s not too bad for a business that was founded just three years ago.

Cary says 2013 was a tipping point for bitcoin, as more than one million people started using the cryptocurrency, and some of the world’s largest platforms including OKCupid started accepting it. More recently, travel site Expedia, gaming giant Zynga and online retailer Overstock. com announced they would accept it too.

“A year ago today there were maybe 4,000 or 5,000 merchants on the entire planet that accepted bitcoin. Now there are about 100,000,” Cary says.

However, it’s still very early days when it comes to digital currencies. “If bitcoin’s entire history was a clock, we would only be in the second or third second on that clock.”

He believes bitcoin has the ability to drastically change financial services in emerging markets, where millions of people have no access to banks, current accounts or credit cards.

“Bitcoin can make a huge difference in places where there is a lack of access to financial services and banking. In emerging markets, they don’t have bank accounts but they all have smartphones.”

Cary, who will address a Bitcoin Finance conference in Dublin today, says it is only a matter of time before money goes digital.

“You used to have to develop photos to see them, but now they are all digital. The same happened with music, movies and books. Everything went digital. Money will be next.”

However, despite all the positives, bitcoin has also been the subject of high-profile heists, global shutdowns, wild price shifts and some shady Silk Road dealings. As a result, its use has drawn the attention of governments globally who are unsure whether, and how, to regulate cybercurrencies.

 

Cybercurrencies gain traction

Japan decided against regulating bitcoin following the collapse of Tokyo-based bitcoin exchange Mt. Gox. Canada meanwhile has enacted legislation regulating bitcoin and other digital currencies. All bitcoin exchanges in Canada will now have to register with the Financial Transactions and Reports Analysis Centre (FinTrac) and take active steps to thwart money-laundering. Californian governor Jerry Brown has signed a Bill making bitcoin and other cybercurrencies legal in the state. The Isle of Man has also outlined plans for digital currency regulation.

Cary says trying to regulate an idea or invention is very difficult. It can’t be treated like something we’ve seen before.

“Imagine if all the postal companies called for email to be regulated when it was introduced all those years ago, and asked for emails to be delayed by several days so postal companies could compete.”

Lee Penrose of Cayman National Bank says one of the problems the bank has when it comes to dealing with bitcoin is that it is an unregulated entity.

“Our regulators might say we are high-risk if we have a large amount of business that’s unregulated. There’s nothing stopping us taking it on. But we don’t want to be considered high-risk in the future or do anything that could affect our licence.

Security needs

“We want regulation because of security issues surrounding bitcoin. Even if it was just minimum regulation such as anti-money-laundering requirements. Security worries have held us back thus far.”

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