If he has heard of ‘Bitcoin’ at all, the average man in the street could be forgiven for dismissing the very idea of an electronic, or ‘virtual’, currency as unnecessary or as a concept too difficult for most ordinary folk to grasp. What’s wrong with the pound? Isn’t Bitcoin just the latest speculative toy for the money traders in the City to play with?
Not quite. It is perfectly possible that so-called ‘cryptocurrencies’, like Bitcoin, have a usefulness and significance far beyond their apparent face value. In much the same way as the internet has revolutionised the way the world now accesses information, it is no exaggeration to say that digital currencies have the potential to revolutionise the way we pay for goods and services. The enthusiasts believe they could very easily and quickly become the new norm.
Certainly the Bank of England (BoE) is taking that possibility very seriously indeed. A recent study by the BoE concluded: “Cashless forms of payment, like the cryptocurrency, Bitcoin, when combined with mobile technology, may reshape the mechanisms for making secure payments.”
The main attraction is that, unlike traditional currencies, alternatives like Bitcoin allow a direct exchange of payment for goods or services without the need for third party (e.g. central bank) involvement. Taken to its logical conclusion, our domestic banks could even create their own electronic currencies which, in time, could replace the use of bank notes.
The debate is not confined to the UK, of course – the subject of ‘digital currencies’ is attracting interest worldwide. However, there are concerns that such new systems, popular and efficient as they might prove be, must not be allowed to compromise the ability of Central Banks to control underlying national currencies. Furthermore, the systems must also be able to withstand any attempts to breach security. The BoE’s ‘One Bank Research Agenda’ is tackling just those issues.
However, let’s assume for a moment that all the obstacles and objections can be satisfactorily overcome. It would not take a huge leap of imagination to link the revolution taking place in ‘Alternative Finance’ with that about to take place in ‘Alternative Currencies’ – arguably, a marriage made in Heaven. Might we see an established Alternative Finance platform forge a Bitcoin union in the not-too-distant future and join some of the early adopters like BTCjam and First Global Credit?
As the Finance Minister recently said: “It is only by harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses and consumers, here and around the globe, and create the jobs and growth we all want to see in the future”.
Well said, that man.
Want to understand more about the basics of BitCoin? There is a useful video from CoinDeskhere.