The surge in Bitcoin’s value has made it very difficult for the Financial services industry to ignore, leading to some encouraging news for the cryptocurrency’s future. On the 29th of November, Nasdaq announced plans to release Bitcoin futures contracts in 2018, allowing investors to profit on both losses and gains on the coin. This follows similar moves from both the Chicago Mercantile Exchange and Chicago Board Options Exchange, seemingly further emphasising Bitcoin’s legitimacy as a currency.
Even some of the cryptocurrency’s harshest critics have apparently caved to the overwhelming public demand for Bitcoin. Jamie Dimon, the head of JPMorgan Chase, labelled Bitcoin a “fraud” and “worse than tulip bulbs”, referencing the infamous bubble in the 17th century, according to the Financial Times, which has also reported that despite this, the US bank is now reportedly considering helping clients trade Bitcoin futures.
According to the Financial Times, Goldman CEO Lloyd Blankfein remains sceptical on the subject whilst refraining to dismiss Bitcoin entirely, “Based on everything I know, I’m not guessing that it will work out. But I can’t say... it’s a fraud, it can’t [work out], because it might”. In addition to this, in an interview with Bloomberg on the 30th of November he is quoted saying “Something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value”. However, despite his unenthused stance, similarly to JPMorgan Chase, Goldman Sachs has stated that due to client demand, it is looking into the future possibility of offering products and services around Bitcoin.
Banks are not the only ones looking into the opportunities surrounding Bitcoin, certain central banks and countries as a whole, have embraced the virtual currency. Earlier in 2017, the Japanese government passed a law that effectively recognised Bitcoin and other cryptocurrencies as legal tender, encouraging retailers to accept it as payment. Since then, the number of Bitcoin transactions has surged, with Japan now accounting for around half the global trade volume of Bitcoin and over 4,500 retailers accepting Bitcoin payments, with the number expected to increase fivefold by the end of the year according to the Nikkei. Despite Bitcoin’s increased acceptance for payments in Japan, the majority of Japanese people still see the cryptocurrency as an investment, opting to still use cash or cards for payments instead.
The next major economy to potentially embrace Bitcoin, is India. The Indian Supreme Court has recently urged the government to regulate Bitcoin, seeking clarity on Bitcoin’s legality in the country, as currently it is neither considered ‘legal’ or ‘illegal’. There is reason to be optimistic on it being legalised, as in an effort to create a more digitalized and cashless economy, the country instilled an extreme demonetization initiative in November 2016, effectively rendering 86% of Indian banknotes obsolete. If the Indian government were to accept Bitcoin as legal tender, it would be seen as a massive step forward in the cryptocurrency’s future and overall credibility.
Despite certain countries accepting Bitcoin, others have taken an opposed view, seeing the cryptocurrency as a dangerous and threatening prospect to their economies. One notable example is China, which used to account for over 90% of the world’s Bitcoin trade volume, yet decided to ban all cryptocurrency trading in early September. Although many believe the ban is temporary, until they can find a way of regulating the cryptocurrency.
Another country taking a hard stance on Bitcoin is Indonesia, which on December 4th 2017, enacted regulation that bans the use of virtual currency that has no clear legal aspects, including Bitcoin. According to the Governor of Bank Indonesia, the regulation will help maintain the sovereignty of the Rupiah as legal tender, as well as quell any money laundering or terrorist financing activities.
In the near future, we will undoubtedly see more and more countries establishing clear regulations on cryptocurrencies and it will be very interesting to see whether countries choose to embrace cryptocurrencies, ban them outright, or find some kind of middle ground.
Security concerns surrounding Bitcoin are another aspect which could jeopardise its future. The virtual currency is still seen by many as an effective tool for black market transactions and illegal financing. Although according to a recent report by CNBC, many criminals are now abandoning Bitcoin in favour of other, harder to track, cryptocurrencies. In addition to illegal transactions, many still worry that Bitcoin is susceptible to hackers. Bitcoin’s vulnerability was demonstrated in 2014, when Mt. Gox, the leading Bitcoin exchange platform at the time, was forced to shut down after hackers successfully stole 850,000 of its customers’ Bitcoins (worth over $450,000 USD in 2014). If Bitcoin is to successfully establish itself as a reliable currency, future and current exchanges will need to prioritise cybersecurity and ensure they operate responsibly.
The future of Bitcoin itself is uncertain and divides opinion. So much so in fact, in a recent poll conducted by Goldman Sachs, they asked 1,200 of their clients about where they see Bitcoin at the end of December, the results could not have been more divided. 30% believe it will rise, 15% believe it will be much lower and 28% were neutral on the matter. One thing which can be agreed upon however, is that the underlying blockchain technology on which Bitcoin is based will undeniably change the future of currency, with many countries already developing their very own state sponsored cryptocurrencies. Whether or not Bitcoin will still be the leading cryptocurrency in years to come, or simply the catalyst for a wave of newer and better cryptocurrencies, remains to be seen.