Two baffling B-words dominate both boardroom and dining table conversations these days – Brexit and bitcoin.
While the former is marred by talk of lack of progress, the latter is seemingly unstoppable.
Bitcoin prices hit nearly $13,000 (£9,700) yesterday in a fresh record. The price surge is thanks to a flurry of investors jumping on the bitcoin bandwagon. Just this week CBOE Global markets said it will launch trading in futures tracking the cryptocurrency while the CME Group will begin initial listings of bitcoin futures contracts later this month.
It’s time to accept that the cryptocurrency is graduating from the wild west to Wall Street. The rise in bitcoin prices has brought bubble troubles with it – but that’s not the only problem facing the cryptocurrency.
Earlier this week, the Treasury launched a crackdown on the virtual currency in a bid to force traders to disclose their identities. Ministers argue that anonymity makes the currency attractive to drug dealers and tax avoiders and that’s why they want to bring it in line with rules on anti-money laundering and counter-terrorism financial legislation.
Analysts have also warned that blockchain, the technology underpinning bitcoin, is not well-equipped to handle transaction volumes. The blockchain network can process about three transactions per second while Visa’s network is capable of processing 2,000. Bitcoin’s meteoric rise is down to investors piling into the currency – some are speculating on it to make a quick buck while the fear of missing out is driving others towards it in droves.
However, big question marks remain on the number of bitcoin users actually using it as a payment system. How many big retailers have responded to the recent bitcoin frenzy and started accepting bitcoin payments? Barely any. The success of bitcoin depends on it going mainstream.
But for it to go mainstream, governments and central banks need to step in with some form of regulation. And regulation by official entities defeats the whole purpose of bitcoin – for it was launched following the financial crisis in order to bypass banks and governments.
For now at least, bitcoin is not an official currency. However, the cryptocurrency’s price has risen more than 1,000 per cent this year making it worth more than the market caps of big companies like IBM and McDonalds.
You can love it or loathe it, but you can no longer afford to ignore it.