Why Bitcoin is the banking industry’s newest, biggest threat

The cold, hard cash of the Internet has seen dramatic growth recently, and shows no signs of slowing down


Late last year, a radical banking experiment hit a major milestone in Europe, a continent with no shortage of financial drama. It had nothing to do with the euro, however, and everything to do with the “currency of the future”: Bitcoin.

The digital currency, still widely dismissed by many as Internet play money, gained an unprecedented foothold in the traditional banking world. In December, a Bitcoin currency exchange in France became the first to officially operate within the European financial system. Bitcoin-Central, and its parent company, Paymium, will offer their Bitcoin customers a legitimate French payment account through a partnership with the French financial firm Aqoba. Users will be able to buy euro-priced goods with a debit card attached to that account, and even have their salary paid into it. The account can then be used to buy Bitcoin-priced products online through Bitcoin-Central and, alternatively, trade in Bitcoins for euros. (One Bitcoin is currently worth around $13.) “Ever since we started Paymium, what we’re trying to do is explain the benefits of the technology to the banking industry,” says Paymium co-founder and CEO Pierre Noizat.

Banks and governments may be slow in listening, but there has been a dramatic growth in the number of Bitcoin users and retailers. WordPress, the ubiquitous blogging website, now accepts payment in Bitcoin. Bitcoin transactions in 2012 expanded to almost five million through September, more than double the number of transactions for all of 2011 and up from just 219 in 2009. It is now used to buy everything from cupcakes in San Francisco to limo rides in New York.

Bitcoin’s big advantage is that it is essentially the cold, hard cash of the Internet. Instead of bills, Bitcoin’s software keeps a public ledger of every transaction among users. If a buyer and seller are running the software on their computers, they can directly exchange Bitcoins, anonymously and with no taxes or bank fees. Others can pay a company to process the payment. Bitcoin accounts are listed simply as a string of letters and numbers with no names attached, giving a level of anonymity impossible with debit and credit cards or even PayPal accounts.

Launched in 2008—the same year the financial crisis struck—Bitcoin is often described as an antithesis to fiat currencies, set apart for what it does not have: a central bank or any regulating authority. What it does have, however, is a PR problem. Bitcoin is known as a choice currency for illegal drug websites, money laundering and tax evasion. And that’s among the minority of people who are even aware it exists. “The big challenge right now is people haven’t heard about Bitcoin,” says Joseph David, the CEO and founder of

VirtEx, a Calgary-based currency exchange that trades Canadian dollars and Bitcoins. He is working to convince Alberta lawmakers of Bitcoin’s benefits, hoping for government recognition. “This is the revolutionary currency of the future,” he says, “decentralized, not controlled by any government, and no one can shut it down or freeze accounts.”

But the struggle to go mainstream exposes a dilemma at the heart of the Bitcoin movement: the thing that enthusiasts love most about Bitcoin—its lawlessness—is the same thing that keeps it on the fringes.

David and other owners of Bitcoin currency exchanges—of which there are thousands—now look to France with envy. Noizat says Bitcoin-Central’s deal with Aqoba “can help people to adopt Bitcoin as a payment network, and make them more comfortable about using our application.” Tony Gallippi, co-founder of BitPay, the company hired by WordPress to process Bitcoin payments, agrees. “This is the Netscape moment,” he says, referencing the Internet company often credited with popularizing the Internet.

The Aqoba deal formalizes a relationship that already exists. Bitcoin exchanges hold bank accounts in various currencies, with various financial institutions. The largest exchange, Tokyo-based Mt.Gox, trades US$3 million worth of Bitcoins every day and has an 88 per cent share of the market. It deals in euros, British pounds, U.S., Canadian and Australian dollars, Japanese yen and Polish zloty. Bitcoin buyers make deposits into Mt.Gox’s accounts, and are credited with Bitcoins in their digital “wallets.” But Mt.Gox and others suffer from unpredictable relationships with banks. On Sept. 25, Mt.Gox announced its account with U.K.-based Barclays had been frozen, with no word from the bank as to why. It later told customers Barclays had shut down the account.

Through its new partnership, Bitcoin-Central will be able to offer clients a regulated account, in euros, directly linked to the Bitcoin network and the client’s Bitcoin wallet. Because balances held in euros will be protected with the same insurance as regular French bank accounts, the move answers at least one of Bitcoin’s ongoing issues: security. Its reputation has suffered from reports of fraud and a string of hacker attacks that saw Bitcoin wallets emptied.

“For a while, all of the news stories have been quite negative—Ponzi schemes, scams, hacking attacks—and it’s always spun in a negative way,” says Michael Bliss, owner of a massage therapy company in Vancouver that accepts Bitcoins. “It needs to be tested and made stronger from serious attacks,” he says, but adds that it also needs time to develop. “It took the euro years to get in the disastrous state it is right now. We’re in year four of Bitcoin.”

For financial blogger Jon Matonis, that is exactly why he’s against Bitcoin companies seeking ties to the banking world. “It’s premature going toward regulation when Bitcoin is still in beta,” he says. “It’s play money still.” Matonis, author of a blog called The Monetary Future, also sits on the board of the Bitcoin Foundation, a group created this year to fund improvements to the Bitcoin software. Regulation and oversight mean less anonymity for Bitcoin’s users, he warns—which is particularly a concern when the majority of payments online are tracked. Besides, he argues, “It doesn’t need legitimacy, it’s already working.”

Which is perhaps why the European Central Bank has even bothered to give Bitcoin the once-over. The ECB produced a report in 2012 that suggested policy-makers keep an eye on Bitcoin, in part because of its ideological departure from the kind of economic policy at the heart of all central banks.

If using Bitcoins becomes as easy as using a debit card, the ECB may have reason to worry. The Internet could house, independent of financial regulation and policy-making, its own sprawling economy. “They can ignore it, and they can fight it,” says Paymium’s Pierre Noizat of the banking establishment, “but it will keep going.”


Why Bitcoin is the banking industry’s newest, biggest threat

  1. A well-researched article! Refreshing! You also correctly identified the “divide” that goes though the bitcoin community (Tony vs. Jon if you will). Interesting times.

  2. a.) Bitcoin needs no central regulation since it is regulated by design. See where the central monetary “regulators” have brought us to worldwide.

    b.) Bitcoin is like cash money. And just as that, you can’t know what people are spending their cash money on.

  3. Bitcoin will likely do to the banking industry what email did to the post office, and what VoIP did to the telecom industry. Bitcoin won’t destroy banking, but it will force it to improve and the movement and storage of money will become vastly more efficient. It is an amazing technology for mankind, but likely a scary technology to banks and payment companies and governments who depend on the strict control and observance of peoples’ money.

  4. Bitcoin is the markets (= free people) answer to the disastrous ponzi paper money scheme, perpetrated by the twins, banks-government. Let’s hope it is not too late to make the full switch to sound (inelastic) money.

  5. Great article! Very accurate.
    Thank you

  6. Great article and very accurate!

  7. Great article. I’ve been aware of Bitcoin now for a couple of years but until this write up never really understood it. Thanks!

  8. Can someone more familiar with this system please explain the dynamics behind the hyperinflation from April to June 2011?

    The premise that inflation/deflation issues can be resolved with no “regulatory authority,” only a solvable algorithm, to determine the supply of bitcoin seems to be based on a pretty crude (albeit popular) monetarist notion of how these processes work…. Bitcoin is always going to be a complementary currency dependent on an exchange rate with state monies to assuage its value. What is preventing the same volatility that occurred in 2011 from happening again?

    It just appears to me that people are embracing this idea from very crude, but crucially testable, ideas about what causes inflation/deflation dynamics to begin with — namely that because bitcoin is inelastic it will maintain its value. Money in a capitalist production economy is a tad more complicated than this folks…

    • That’s a pretty bold claim – that bitcoin will “always” be dependent on edge-exchanges to transfer to other currencies. Certainly, there will be multiple world currencies and bitcoin will have its own domain, but it isn’t dependent on sovereign currencies in any form. Bitcoins have inherent value, being carved from cryptographic granite, as it were.

      Volatility in the exchange rate markets have reduced over time, which is quite evident when you graph its progress versus the US Dollar. I’m not sure why you feel pressed to say markets fluctuate, as that is the case with conventional financial vehicles.

      Also, the whole “deflation” fear is another myth that needs to be put to rest. Bitcoin is divisible to a quite small number of individual units per bitcoin, known as a “Satoshi” in honor of the creator. This assures plenty of flexibility, without going down the same disasterous path other world currencies have — namely, debt issuance and debasement.

      I’m very pleased with bitcoin, first for the freedom it affords and the shelter it provides from whimsical monetary policy decisions and political chicanery of all forms. I’ll take rational mathematics over paid-for policy any day of the week, and it seems most of the internet agrees with me as well.

      • I think its a valid claim. Because at the end of the day, bitcoin is not and will never be money.

        I’ll put it another way. The value of the $CAN is derived from its quality as the unit of account and means of payment in which the production process and monetary circuit begins. You can look at this from two ends:

        1) the creation and destruction, or efflux, of bank deposits between private creditors and debtors (inside money) in the process of production and labour renumeration.

        2) the flux of currency between the central bank and chartered banks (established creditors) in the process of providing settlement balances to maintain systematic stability.

        I think this has proved to be a remarkably powerful and robust system throughout the 20th century when coupled with counter-cyclical fiscal policy. What really screwed things up was the disastrous ideology of financial deregulation that really began under Clinton. Now there is bad blood because instead of writing off bad debts and letting established creditors go under in a controlled way, these institutions have been supported.

        Bitcoin will always be an internet play thing because real value comes from production to consumption. And this requires an asset-liability ledger to assuage any sense of relative value. Bitcoin is a commodity used as a means of exchange whose value is ONLY demand-pull. In other words, what exactly is the “inherent value” of bitcoin’s source code?

        • Oh my, “Systematic stability” – I’m confused, is this the same stability that enabled the meltdown in 2008? Is this “stability” the same creation as the “Flash Crash” in May 2010? Is the chronic misallocation of capital the same byproduct of “stability” in the financial system?

          Is the billions upon billions of US Dollars or Eurodollars being created through convoluted debt vehicles and “stability” funds the same kind of “Stability” of which you speak? (At the cost of future generations, and their children, I might add.)

          Central and chartered banks are at the core of these problems worldwide, and you dare bring up the term “stability”?

          Even with regulation, the banking system and those who control the flux of currency and debt issuance have always done so with less than altruistic agendas. Every sovereign currency has had some crisis, whether there were tight or lax periods of regulation.

          If sovereign currencies were patients, I’d say they always have some kind of terminally destructive cancers lurking beneath.

          As for the “internet play thing” as you so condescendingly put it, I’m sure it will be around much longer than the mirage of “stability” your sovereign currencies exhibit. But don’t take my word for it. Keep all your eggs in one basket, I’m sure that will be a more permanent — and highly memorable lesson.

          • Feel free to reread my post and reply accordingly. But I get the sense from your accusative and argument-free response that any further discussion will go around in circles. But in case I am wrong I will address your points and reiterate my central claim:

            -The first role of the central bank is to provide stability to the banking-financial system. This means that regulation and the hierarchy of money is built in from the ground up. It can do this job well or it can do it poorly. As I said, the current situation is a direct outcome of the government and Fed doing this job very, very poorly. There is nothing inevitable about this, it was the result of an ideology of “efficient market hypothesis” that asserted private creditors/debtors could self-regulate. Read Hyman Minksy on financial instability for more.

            -Yes, the aggressive response of the Fed to swap bad assets for safe money was stabilizing. If the authorities did nothing the financial system’s bad debts would have led to an implosion of credit and a repeat of the situation in 1929-1932. As I said, bad debts should have been written down in a controlled fashion and TBTF institutions dissolved.

            Now. Please answer these questions directly or don’t bother replying:

            -What is the “inherent value” of the bitcoin algorithm?

            -How can a digital commodity like bitcoin function as a unit of account required for the production process to begin and value created as incomes/output? (according to its own literature, bitcoin is NOT a mere financial variable, it wants to be a currency in which goods are priced).

            -What is stopping the sort of volatility that have historically affected ALL experiments in free banking from occurring again? At the moment your answer seems to be there is none. What great security!!

            (I used the term play thing from a quote in this article citing a board member. If you have a problem with the term take it up with him).

          • A few comments on your introductory statements:

            1.) “The first role of the central bank is to provide stability to the banking-financial system.”

            If we are grading this system’s performance, I’d have to give it an “F”. There are numerous examples in history where either willful ignorance or pure greed has resulted in mis-management and crisis.

            This is not just a matter of “doing the job well or poorly” as you state, since it seems they always gravitate to the “poorly” part, sooner rather than later.

            2.) “The aggressive response of the Fed to swap bad assets for safe money was stabilizing, etc..”

            The Fed response resulted in a massively expanded balance sheet, and the lovely “whomp” sound of a can being kicked in a long-arced parabola toward the horizon.

            These decisions are being made by the very people and institutions that should be providing stability. The unfortunate result is long term debt accumulation will end in a catastrophic credit implosion that will be larger than any prior crisis.

            On to bitcoin specific questions:

            1.) “What is the inherent value of the bitcoin algorithm?”

            People often stumble on this part because they’re not used to operating in the abstract realm of digital representations or code. Tangible items have properties that you’re familiar with – if I point to gold as an example, you’ll conclude that it has fungible and scarcity characteristics, allowing you to accept its use.

            Bitcoin has value, but not in the numismatic sense to which you are accustomed. Its roots are in SHA256 and ECDSA cryptography, which ensure scarcity (and solves the double-spend problem) through proof-of-work. You can’t “print” bitcoins any more than you could paint a rock and call it a gold nugget. It is fungible, via the peer-to-peer network that simultaneously verifies all transactions and provides transit to any other node on the planet.

            As to inherent value – I value a system that allows me to freely allocate my wealth without restriction. Geographic or political concerns disappear. I value a system that allows transfers in hours, not days, and can do so without extortionate fees. I value a system that can’t decide to block payment on a whim. For business, I value a system that doesn’t allow chargebacks for equally frivolous reasons. I also value the fact this allows easy physical transport, for situations where I’d need to travel elsewhere.

            2.) “How can a digital commodity like bitcoin function as a unit of account,. etc..”

            This is already happening. People are trading bitcoins with each other for goods and services. (With the blockchain functioning like a triple-entry-ledger for all transactions.) There is no catch-22, as the system is already functioning and growing at a quick pace.

            Most articles focus on the “black” market aspects (which sovereign currencies have been inhabiting for a long time) which ignores the inherent value of bitcoin as a currency and payment processing system.

            To put it another way, there would be no black market if there wasn’t any VALUE to begin with. Just like Canadian Dollars, US Dollars, Pounds, Yen, Yuan, etc.. All of these currencies have HUGE black markets for various things, yet no one seems to use this as an argument against using that particular currency. Curious, isn’t it?

            3.) “What is stopping the sort of volatility that have historically affected ALL experiments in free banking from occurring again?”

            Explicitly, the system is designed to be just like the internet, decentralized with no central point of failure, global reach, and an excellent foundation in non-inflationary principles by having verifiable units and a upper bound on their numbers. (Don’t get fooled by deflationary concerns, it is quite divisible as I’ve stated before.)

            This means no one can turn off a single machine and cause the entire network to go ‘poof’. (Which has been the bane of other digital systems.) Even if all of the USA were somehow removed from the peer-to-peer system via firewall blocking or some kind of embargo, the rest of the nodes would survive, as bitcoin has global reach.

            As for pricing volatility, the exchanges at the edges provide these – but you must realize that conversion into other currencies is merely a phase in bitcoin’s evolution. While market depth has increased and volatility have decreased relative to other currencies, the ultimate use for bitcoin will between the peers themselves which will preclude any “chokepoints” that have been a source of concern.

            To put it simply, if I’m earning in bitcoin and spending in bitcoin – what do I care what the Canadian Dollar or US Dollar is doing? Would I even bother stepping out of my secure network to transfer into these currencies? You’d be surprised how many are already doing this, and this number will grow as edge-exchanges become more irrelevant.

            As for security, other than the blockchain – which is powered by the largest collection of machines on the planet, there are methods to store your bitcoins in “offline” wallets that ensure absolute security. As bitcoin is digital and can exist on many different devices, this provides portability and flexibility that is unheard of in other currencies.

            As for the last – the “Plaything” comment – fine, you took it from another source – so I retract any direct statement to you regarding the matter.

            I hope this has helped clarify some of the questions you had.

          • Briefly on status quo money and banking. Judging the effectiveness of this arrangement has to be done in context of other comparable arrangements. For example, the international gold standard until WW1. It also has to be taken as a rule of thumb that capitalism is inherently unstable when considered against previous social systems that were seasonal, predictable, customary, etc.

            Yes, history has lots of examples of discretionary mistakes or just corruption on the part of authorities. But at the same time every free banking system in history I am aware of gravitated towards some sort of centralization (the self-organized clearing houses in Scotland and later in Montreal for example). The uncertainty that future-oriented capitalism creates tends to create a want for reassurance.

            Finally, I disagree with you that this inevitably trend towards poor management. I follow Minksy’s hypothesis that in finance “stability breeds instability” as expectations continuously adjust. That seems to be the best explanation for the deregulation from 70s to 2000s that is the precursor to this mess. And I’m a cautious fan of narrow banking proposals akin to the old Chicago 100% reserve plan. What matters is less a wise central banker than the raw ability to create a secure asset free of default risk on demand. Only the monopoly state it seems can do this. Treasury can do this just as well as a state-mandated banker.

            Now to the bitcoin questions.

            1) We have different notions of what value entails. You present a subjective view (demand-pull). While I emphasize an objective view (cost-push) that value is created in the production process as output and incomes.

            Sure, people value gold (and bitcoins) because of their scarcity and fungible qualities. I don’t differentiate between physical or intangible here, its a question of choice that is always immaterial. But the point is that each of these are commodities that act as a store of value (and maybe a means of exchange). Value has to first be created in production to consumption and have a positive quality as purchasing power.

            2) Similar to above point. “Bitcoinland” is completely dependent on imports from producers using a standard unit of account. Goods and services traded for bitcoins first have to be produced. This has nothing to do with black market per se. The point is that it takes more than a scarce object to act as a numeraire. Money in capitalism has always been elastic, constantly created and destroyed in a process called efflux and reflux. What matters is the value created in this process as incomes/output that determines if there will be inflation/deflation. For example, if an efflux of new money is directed at increasing prices of already existing assets to control market positions there is no value created.

            3) Again, bitcoinland is totally import dependent. Because of this, anyone holding bitcoins is always going to be affected by the whim of exchange rates. The value of bitcoins entirely depends on the subjective choices of its holders. Whereas a dollar created as non-inflationary income in production to consumption has a positive value.

            Finally, I’ll just say this. I am critical because I am sympathetic. I like the idea of complementary currencies as a sort of pressure valve. They can be stabilizing! But the logic of monetarism behind bitcoin is flawed. A better model can be found in the cashless WIR bank in Switzerland that has been discussed by Bernard Liaetar and James Stodder.

          • Interesting discussion between you and TraderTimm. You state: “We have different notions of what value entails. You present a subjective view (demand-pull). While I emphasize an objective view (cost-push) that value is created in the production process as output and incomes..”

            Why would so-called ‘cost-push’ values created during production process be objective and not subjective also? Aren’t cost-push values determined by ‘demand-pull’ values when intermediate products and labor etc. are collected during the production process? Ultimately value is determined by utility to individuals, which is, according to Austrian economics, an ordinal measure. In a free market economy, the price or value of a currency is determined by supply and demand, like all other goods.

            I have watched some presentation of mr. Bernard Liaetar and I praise him for his heroic effort to discuss the monetary system as an academic. But in my opinion, scrib currencies are flawed because they are protectionist in nature, i.e they privilege local merchants.

          • Interesting questions. First of all, I agree with you in the obvious sense that a cost does not create a price-value on its own accord. I like to think of two complementary factors at work: evaluation and the creation, distribution and destruction of positive value in a du jure money of account. There are important reasons why the former on its own is also insufficient, or why the subjective-value world of Austrian free market economics isn’t a working model.

            Think of cost-push values as money-incomes paid out to remunerate the costs of production. Yes, these values are determined by the producer’s demands. But they are also objective in the sense that they are measurable, positive statements in an accounting structure. Its not simply that intermediate products and labour are collected. These costs are accounted for, which through the modern banking deposit processes generates incomes which becomes purchasing power over total supply. By definition, this purchasing power has a positive value. Subjective demand-pull value can only influence the instantaneous market value of already existing positive value. Mind games, choices and deliberations do not create real, positive value on their own. The collection of the means of production is actually a remuneration of the costs of production that require already existing institutions; such as a unit of account, stable time space payment system, not to mention the vagaries of civic and property law at the heart of it all.

            This is why I made the distinction to talk about the value of bitcoin. There are no incomes being generated in bitcoin. So regardless of demand-pull, there is always going to be a potentially catastrophic change in the cost-push value due to exchange rate instability.

            “Ultimately value is determined by utility to individuals… an ordinal measure.” Now things get tricky. When we are talking about money value, by definition, we are referring to a value that is measurable in stable integers, the unit of account. Individual utility is ascertained through a price structure. This structure is not created by utility and choice alone, but through institutions such as banking and state money payment systems that determine the generation of incomes/output.

            Not to say I have zero love for the Austrians. Value as an outcome of individual utility could be reinterpreted as an ideal world of socially neutral money. This just isn’t the institutional system we have at the moment where established creditors and producers are sovereign.

            Have to remember that Liaetar grew up behind the Euro project. So as a bitter old man I think he is keen on rethinking money in the opposite direction! His whole point is that we have been designing our payment systems to be more and more efficient and universal in scope, without really thinking about the negative externalities of this model. I also really like his idea that a dual money system of (gold and silver) world trade and (token) domestic circuits was the historical norm before 19th century.

        • This is the classic gobbledygook of a Keynesian useful idiot. This kind of crap has no value whatsoever worth responding an further to.

    • One of the major current drawbacks of bitcoins is that the exchange rates fluctuate far too wildly.

  9. This strikes me as funny: “Ponzi schemes, scams, hacking attacks—and it’s always spun in a negative way” — you know, as opposed to how ponzi schemes, scams and hacking attacks can be positive things.

    • This just means bitcoins are valuable. I’m sure every world currency has had its share of scams and robberies – HSBC Bank Laundering anyone? Sure doesn’t stop the citizens of those countries from using their currency, does it?

      • No, all it means is that they *were* valuable. Enron shares and Madoff investments were valuable until the scams broke.

        Scams don’t prove value, they lessen it. The only way these things can have a positive spin is if the reality of their value is incredibly shaky — ergo untrustworthy — ergo.. play money.

        • Ah, so the currencies in which those scams were enacted are all worthless? Or are you simply confusing the scheme with the underlying currency? Because if you aren’t – you’ve made an argument against sovereign currencies.

          Also, your assertion of “positive spin” coupled with “shaky value” is a logical contradiction. You might want to reconsider that particular line of reasoning.

  10. Good article, I think it is Bitcoins 4 th Birthday today. So lets celebrate!!!

  11. Bitcoin will not destroy banks.

    1. The currency and the network can be 51% attacked. Thats not something that ordinary people will want to keep all their money in.

    2. No Government will never demand taxes in Bitcion. This limits the usefulness of the currency.

    3. People will want banks to hold their Bitcoins as their own computers can and will get hacked.

    4. Once the miners do not get new Bitcoins they have to collect a higher transaction fee. This is also true if Bitcoin becomes very popular. This will in the future decrease the speed of Bitcoin transactions, its allready happening. A transaction can take an hour.

    As for money laundering. Try launder a couple of hundred of millions with Bitcoins.

    Federal agents would ultimately home in on $500 million that had moved from HSBC Mexico to HSBC’s operations in the United States, according to the confidential investigative records.


    Moving that much money with Bitcoin is not possible at all today, maybe in 10 years but right now, thats why the drug cartels buy into or create their own banks.

    And how will you move all that money from Bitcoin back to cash? They can´t without going through the banking system.

    Also all transactions are traceable, this can make it quite easy to spot laundered money. By looking at how the money moves, what time of day etc and then looking at who gets the money.

    We are still probably years away from Bitcoin being a threat to any bank or used as a money launder tool.

    • Oh my, where to begin. I’d suggest some more reading before spreading false information.

      1.) 51% attack – this is a reference to how the blockchain works. The longest verified blockchain is the official transaction ledger. There’s a lot of information theory here that I’ll gloss over, but essentially to mount an attack and present your blockchain as the “correct” one would require a system capable of ~11.66 Terahashes per second. That is a mind-boggingly large number. And even if you could do so, you’d only be able to spend your coins – before the whole attack caves in as extra capacity overwhelmed your efforts. It is like building ropes out of sand before the wave hits the shore – this is why you haven’t seen one, ever.

      2.) Government taxes have nothing to do with currency legitimacy, I’m afraid. The US itself didn’t have regularly imposed taxes (other than some war funding) until 1913.

      3.) People want banks to provide security – Yes, I suppose they do, however that ignores any other services or technologies (like offline wallets) that allow you to have perfectly iron-clad security on your own.

      4.) Decrease of transaction speeds – sorry, you’re wrong. There’s still six blocks being verified every hour, and has been doing so for quite some time. This value fluctuates slightly – but has maintained the average quite easily. Transaction verifiers do collect fees, however there is no requirement to do so.

      As for your later points about money laundering – I fail to see how you consider that to be a benchmark for a successful currency. You also mention yet another example how conventional banks in the system engage in illegal activities. Thank you, you’ve made my point for me!

  12. One of the best article ever written on the subject, well informed and presenting a balanced perspective on Bitcoin’s potential.

  13. It’s good to see another publication jump on the ‘power of bitcoins’ story. American Banker has been warning about the impact they could have to banks since last year. Check out Bitcoin Magazine if you want to really understand this market.

  14. Personally when I think of drugs, money laundering, and tax evasion, I don’t think of Bitcoin. Rather, I think of dollars and CitiBank.

  15. Terrific article, Rosemary. As some of your other readers pointed out as well, Bitcoin will improve payments and finance overall. Since the current banking industry thrives from perpetuating inefficiencies, they will likely not welcome bitcoin. It’s coming, though, whether they welcome it or not.

    Cheers, Charles B.

    Owner, http://www.RoyalBitcoin.com

  16. I only need to know one thing: Bitcoins are going up! With the new restrictive laws that the USA is enacting to prevent their wealthy from expatriating and taking their money with them, Bitcoins are the current way to shuffle your money overseas out of the country without Uncle Sam knowing about it. Convert US Dollars for Bitcoins and transmit the Bitcoins to another wallet connected with an offshore account. When you reconvert the Bitcoins into US Dollars (or any other currency for that matter) in your new location, the net effect is that you shuffled your money out of the country right under Uncle Sam’s nose. Expatriation from the USA is rising as the wealthy are getting fed up of getting taxed more and more. And what happens to anything when millions and millions of dollars are deployed to buy it? It goes up. So I’m buying Bitcoins every chance I get as a speculative investment. I started accumulating in November at around the 11.00 USD/BTC level. The exchange rate is now sitting at around 13.50 USD/BTC. The return on investment for Bitcoins is better than what anything else can give you right now.

  17. The spurious and specious arguments against Bitcoin are highly amusing (or perhaps, actually tragic) given the scope of the huge frauds being perpetrated by the Federal Reserve, BoJ and ECB! However, the naysayers aside, whether through Bitcoin or another emergent system, some system similar to Bitcoin is going to eventually replace national or centralized bank currency. Fairly rapidly, once the existing governments and banks complete their bankruptcy and debasements. That system is “a dead duck,.” once systems like Bitcoin reach the ‘swarm point.” So better to watch this trend and engage with deep interest rather than be caught up in the demise of the existing system.

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