Banks have a role to play in crypto currencies
When a new payment system such as Bitcoin arises it tends to be successful “in areas where a need is not being met”, Gottfried Leibbrandt, Swift chief executive told delegates yesterday. He said his fascination with Bitcoin – “both a currency and an innovation” – had not changed in the past 12 months.
While there is a romantic notion that Bitcoin and other cyber currencies can exist outside government and the banking system, most of the panellists agreed that banks were needed to drive acceptance of Bitcoin as a currency and that Government will have a role in being able to identify illegal transactions and collecting taxes, writes Dick Pirozzolo.
One panellist quipped: “Bitcoin may not be interested in government, but government is interested in Bitcoin.” Chris Larsen, co-founder and chief executive of Ripple Labs, an open-source distributed payment protocol, was quick to point out: “You can show regulators that these are terrific tools for finding the bad guys, while consumers can keep data where they want.”
The notion that cyber currencies would create an alternative to banking was false, he added. “Banking is really hard. We are all about enterprise and getting banks onboard and we think the banks will drive this.”
While cyber currencies are not a panacea, able to create what some call a “cashless utopia”, most of the fears can be overcome or at least explained away. When an audience member brought up the recent Flexcoin robbery, where hackers made off with every Bitcoin on hand, Jon Maronis, executive director and board member of Bitcoin Foundation, responded that “it was lax infrastructure. If a bank had been robbed you would not blame the dollar.”
Another audience member observed that unlike government currencies, “Bitcoin is not backed by men with guns. Whenever Bitcoin has a big drop in value, there is no entity that can swoop in and prop up prices. How does the volatility get solved?”
Matonis quickly countered with: “Men with guns don’t back up gold.”
