01: FIRST THEY IGNORE YOU.
It took half a decade before Bank of America Merrill Lynch became the first major bank to assess its credibility and viability, saying it could “become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers”.
02: THEN THEY LAUGH AT YOU.
With that, the floodgates were opened, as big players fired criticism at the Bitcoin system. Comments ranged from the cautionary – the Monetary Authority of Singapore said in 2013 that it did not regulate this currency (only to change tack the following year) – to the downright dismissive, with Morgan Stanley’s chief executive calling the Bitcoin phenomenon “surreal”.
These are valid points. Its ease of use leads to an inherent instability, leaving the system vulnerable to hackers, fraud and theft. Mt. Gox, one of the biggest exchange platforms for Bitcoin, filed for bankruptcy in 2014, after alleged hacker attacks drained the exchange of US$390 million (S$546 million) worth of currency. In 2013, the FBI shut down online black marketplace Silk Road and seized US$3.5 billion worth of bitcoins.
Moreover, the virtual currency experiences fluctuations in value that would make a yo-yo seem mild. It is so volatile that prices have fluctuated between US$0.30 and US$1,242 over the years.
03: THEN THEY FIGHT YOU.
Still, its popularity among the masses climbs, prompting former critics to create similar cryptocurrencies such as Litecoin, Peercoin and Dogecoin. Last year, Goldman Sachs filed a patent application for its virtual currency SETLCoin, while Wall Street giants including Visa and Nasdaq have joined forces to create a new system inspired by Bitcoin’s blockchain technology.
At the same time, the fight against Bitcoin continues. In the wake of last year’s terrorist attacks in Paris, the EU is planning to implement stricter controls over Bitcoin trade to make it harder for terrorists to get access to funds through anonymous donors. Two months ago, prominent Bitcoin developer Mike Hearn publicly cut off ties with the currency he was once enamoured with – only to join a fintech firm that invests in the very technology underpinning Bitcoin, blockchain.
With a multi-pronged, ostensibly global effort to suppress the growth of Bitcoin, could an end be in sight?
04: Then You Win?
Don’t trot out the obituaries just yet. With over 140,000 transactions per day currently – which is double that of last year – and a total value of nearly US$5 billion, it has made its way onto just about every whiteboard on Wall Street. You can use a Visa-backed Bitcoin debit card to buy a Tesla, or even book a trip to outer space with Richard Branson’s Virgin Galactic.
Singaporeans can join in the fun too via locally available exchanges including Coinbase, Coin Republic and Itbit. For the novelty factor, check out the country’s first Bitcoin ATM at Hong Lim Complex.
Ironically, despite all that chest-thumping and loud raging, Bitcoin received its most essential endorsement from none other than former US Federal Reserve chairman Ben Bernanke. He told Congress in 2013 that virtual currencies “may hold longterm promise, particularly if the innovations promote a faster, more secure and more efficient payment system”.
Now, that’s what we would call a truly cashless society.