Bitcoin (BTC) represents one of the most important and perplexing revolutions of late. Essentially because the structure and its content are often misunderstood: Bitcoin vs. Blockchain. So is BTC a speculative asset? Indeed. Does BTC have any future? It depends. Is BTC an equivalent of Tulipmania? No. Are bankers against Blockchain? No, they are not. Are against BTC? Yes. It might seem nonsensical; it is not. To illustrate, we first need to know exactly what Blockchain is.
The banking aspect of Blockchain represents the digitalization and decentralization of transactions in the field of cryptocurrencies. Thus, the input and output of BTC are registered in a digital ledger, and each group of ledgers forms a block of them, therefore creating the Block-Chain. This might seem trivial, but digitalization and decentralization of transactions, changes the banking model, because it accelerates transactions, especially international transactions. The Society for Worldwide Interbank Financial Telecommunication (or SWIFT in its abbreviation) is used for transnational communications. It is the traditional method to send money abroad, and in fact, SWIFT is the backbone of the banking system, as all transnational transfers have to go through SWIFT. In fact, it has such importance that it can be use as an economic warfare tool. Thus, the Belgian authorities decided to kick North Korea’s banks off SWIFT.
SWIFT, however, has a problem. If an American with a business based in San Diego, for instance, wants to send money to China, to a company based in Beijing, the transfer will take 3 to 5 days. On the other hand, if this transfer is done with BTC, and thus through Blockchain, the transfer will take 10 to 30 minutes. This obviously increases the competitiveness of the economy. SWIFT centralizes the payments and distributes them between the payer, and the creditor. Blockchain, alternatively, allows transactions directly between banks. And in fact, BTC is becoming outdated; there are other currencies with far better timings, which are also capable of handling more transactions at a time. Therefore, BTC is a cryptocurrency that uses Blockchain, and this currency is ranked first when it comes to market capitalization. But there are other cryptocurrencies, some of them with the potential of surpassing BTC.
Curiously though, Ben Bernanke (former President of the Federal Reserve) thinks BTC will sink, but considers Blockchain beneficial. Facebook has recently banned BTC ads, among others. The permanent Secretary of the Thai Ministry of Finance has stated that even if “the Blockchain can be beneficial” they would rather “not use BTC.” Western Think Tanks are alarmed with the use of BTC for terrorist purposes. And finally, the international public opinion classifies BTC as a potential weapon of massive destruction for governments and the banking industry. This is the crux of it all. BTC’s market capitalization is $140B. Thus, money invested in BTC is not in banks or investment funds. This causes issues banks and governments, because once fiat currency is invested in BTC, it cannot be taxed, controlled or compounded. Some might think this is like black money. It is not, because black money cannot be transferred from Barcelona to Sydney.
It is hard to believe, though, that governments did not foresee the challenges posed by BTC against the traditional economy and security. Why did it take so long to implement regulations? Because the best way to popularize a product is allowing people to use it. The main purpose of BTC has been to bring the Blockchain technology to the people while popularizing the digital currency, along with eliminating cash. As we can see, financial markets and governments have allowed a temporal, strategic loss to bring the financial system up to date. Once the objective has been accomplished, it makes little sense for big investors to keep buying BTC so it performs bullish. Bringing Blockchain to the citizens has been accomplished. But why should anyone be interested in implementing digital banking? To have total control over the money, and the capability of imposing negative interest rates. If savers leave their money in the bank, it has the ability to impose negative interest rates (i.e. the price of the money is lower than inflation) but if someone decides to store their funds, under the mattress, the bank loses its capability to affect the money. This will favor financial markets, because savers who want to see yielding capital, will have to invest their savings in the stock market.
So this is essentially why the comparison between Tulipmania and BTC is flawed. There are several reasons;  the tulips did not add anything new to the economy, whilst BTC is a symptom of a tendency that I would qualify as unstoppable, the Blockchain;  governments are starting to regulate BTC and other cryptocurrencies;  and lastly, big companies are starting to accept BTC and other currencies as a payment method.
As mentioned before, BTC’s problem is the lack of control. There is no central authority that regulates it. Surprisingly, the State of Nevada, is initiating the legislative process to start accepting BTC and other cryptocurrencies as a way of tax payment. Japan, however, has already recognized BTC and other currencies as legal tender. These facts might have something to do with the devaluation of the dollar (12% during 2017) and the Yen (the US has asked Japan not to devaluate). This would turn BTC into a wealth reserve. But we will talk about this in another article. The main conclusion is that the establishment does not love BTC, but it would not be wise to give it up for dead. For now.
Pol Serrano is a journalist, and MA in Politics and International Relations at the University of Kent. He specializes in economics and security.