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Bitcoin, currency and competition

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Why is there only one Bank of England? Only one Pound Sterling and one interest rate throughout the UK? The Head of the Competition and Markets Authority says that competition in currency is “welcome”. So what is he going to do about it?

I’m thinking about currency and competition because, and I imagine I’ll get trolled for saying this, but I had good fun arguing with some of the Bitcoin folk at Innotribe this year. I learn quickly by arguing with smart people but it’s fair to say that not everyone has the same educational policy.

Innotribe’s bitcoin series included talks on regulation, disruption and the future of investment in the space. The crowd, comprised of a mix of digital currency veterans and novices alike, displayed an enthusiasm and critical eye that largely defined the day’s events.

[From Bankers Debate Bitcoin at Sibos 2014]

That critical eye included me for one. I remain sceptical about Bitcoin as a currency while I remain enthusiastic about the potential for blockchain technology (and, indeed, other kinds of blochains and other kinds of virtual currency). By coincidence, the week before Innotribe, we had had our annual Unconference at Google in New York, where Jeffrey Robinson had given a talk about his new book.

Although Jeffrey Robinson, an author and journalist, described the digital currency as a fraud, he said the underlying technology was “brilliant.”

From Payments Industry’s Focus Turns to Fraud, Security|PaymentsSource at .

In fact, in Jeffrey’s book BitCon: The Naked Truth About Bitcoin (Sep. 2014) he quotes the Nobel prize-winning economist Paul Krguman as saying that “there’s a good case to be made that bitcoin is impressive technology for payments, but why a bitcoin itself should be something of value is not easily answered”. Quite. Bitcoins are a means of keeping score in maintaining the distributed public ledger, but it seems to me to be something of a leap — with a logic that eludes me — to see that score as being a currency or to see the blockchain best used for retail payments.

Anyway, I enjoyed Jeffrey’s book and found it an interesting perspective on a hot topic. Having spoken to Jeffrey at some length and having interviewed him for a podcast, I think it is reasonable to say that one of his observations is that some Bitcoin devotees exhibit cult-like behaviour. I know this will result in deluge of abuse via anti-social media, but I actually think he is right about this, and I’m not sure it helps to advance the cryptocurrency case. I keep seeing this kind of thing…

Rather than spending their time hiring lobbyists to try to convince governments to legislate against cryptocurrencies and the block chain

[From How Banks Can Cash In On Bitcoin – Informilo]

I don’t believe this for a moment. Having been involved in a number of conversations with regulated financial institutions, and working as I do for a company that provides paid professional services to more than one of the same in connection with cryptocurrencies and the blockchain, I can tell you right now that I have never heard even one banker ever say any such thing. Never. Nor have I ever heard of any bank hiring lobbyists that are anything to do with Bitcoin at all one way or the other

The disturbing truth for many in the Bitcoin community is that the majority of bankers really don’t care. If Bitcoin becomes a digital asset with a liquid market then they will trade it just as they trade frozen orange juice (this is real, by the way, it wasn’t made up for Trading Places). If Bitcoin becomes the only money in the entire world, I’ll still need to borrow it from a bank to buy a house or car so they will lend it to me.

Innotribe SIBS 2014 Boston

I was accused of being “vile” on Twitter for saying this sort of thing, an accusation I refute in every degree. Perhaps it was a little strong to refer to the “libertarian fantasies” of the Innotribe panel but I think I stand by the substance of the comments, and I do not restrict them to Innotribe. I was amazed to see similar comments from the head of the UK’s Competition Commission.

Alex Chisholm, chief executive of the Competition and Markets Authority, said the success of bitcoin would depend on trust but had the potential to liberate people held down by corrupt governments.

This seems to me to be an entirely unjustified utopianism that highlights precisely the strange cult around Bitcoin. This is exactly what people (e.g., me) thought about the internet a generation ago and I can’t see much evidence that the hapless inhabitants of North Korea (to pick just one example) are any more free because of TCP/IP. It’s the same utopianism that people had about communism between World War I and World War II, the same utopianism that people had about America in the 19th century. But I digress. Mr. Chisholm went on to say that

“It’s very welcome to see competition in the market, like many others,” he told the Institute of Directors’ annual gathering at the Royal Albert Hall.

Well, I for one would love to see the Competition and Markets Authority launch an investigation into why there is only one Bank of England, one Pound Sterling and one interest rate for the whole of the UK so more power to his elbow. I wonder if this is the sort of thing the Government were hoping for when they pointed Mr. Chisholm? I do hope so.

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