A former chairman of the US Securities and Exchange Commission has launched a stout defence of the bitcoin virtual currency against those who forecast that it is certain to fail.
Writing in American Banker, Arthur Levitt says: “Naysayers love to nay. And the bitcoin sceptics – of which there are many – are at it again,” citing research by Citigroup.
And in the comment, co-authored with Peter Smith, chief executive of Blockchain, a company that provides blockchain technology and bitcoin wallets, he adds: “We have a little secret for all of those who once again have predicted bitcoin’s imminent demise: They’re wrong.”
Levitt and Smith mostly agree that the US and Western Europe are well served by existing financial systems but point out that the established financial industry has left over a third of the world’s population without access to current accounts, savings accounts or credit cards.
“It doesn’t have to be that way,” they write. “Blockchain technology provides the opportunity to rewrite the financial services sector and create a more global, open and efficient system. Such a system can provide unparalleled access to a stronger economic future for billions across the globe. It can help a woman in Afghanistan who seeks to hold value independent of the men in her life, or a doctor in Venezuela who is watching the bolivar become worthless every day but can secure assets by holding their value in bitcoin.”
They dismiss the argument that bitcoin can’t reach parts of the world that lack internet services, noting that there are almost twice as many people with mobile phones as have bank accounts or working toilets.
“The combination of digital currency and mobile phone connectivity promises to fundamentally overhaul a banking system to the benefit of those excluded from the current so-called superior model,” they write.
Bitcoin’s ‘two incurable diseases’
As for the “last mile” costs of making the conversion into local currency, Levitt and Smith point out that “in many parts of the world, holding value in bitcoin is preferable to the volatility of local currency. Note the aforementioned Venezuelan doctor who has no interest in converting bitcoin to bolivar anytime soon.”
Turning to bitcoin’s “two incurable diseases” of volatility and a lack of resiliency, the authors write that in the immediate wake of Brexit bitcoin experienced record transaction volumes as it became a safe haven for Britons watching the pound tumble. Despite the cryptocurrency’s increased use and relative youth, bitcoin’s value remained stable because its global nature made it more resilient to geo-political risk.
“And yet the naysayers continue to nay. But as we have said, they’re getting it all wrong. Is bitcoin perfect? Of course not, though we would argue that it’s perfectly accessible – an attribute lacking in our ‘superior’ centralised system. Could the bitcoin blockchain disrupt payments? The right answer is a resounding yes,” they conclude.
The comments by Levitt and Smith follow a similarly positive report on blockchain – the technology behind bitcoin – by the World Economic Forum. The WEF argues that blockchain “has great potential to drive simplicity and efficiency through the establishment of new financial services infrastructure and processes.”
It also reckons that new financial services infrastructure built on blockchain “will redraw processes and call into question orthodoxies that are foundational to today’s business models.”