Cryptocurrency gaining traction in mainstream - Jim Duffy comment
For the last 50 years, they have dominated our high streets. They have been the linchpins in local communities ensuring we can bank our money, save, take loans or sort out financial issues. We have to trust banks to keep our money safe, to stay solvent and to offer services that help us.
Banking has had tough times as there have been a few bad actors and some financial crashes that have left them in tatters. But, they remain, for now, intact. Because we still trust them.
Part of that trust is the fiat currency they trade in. These currencies comprising for example, a £10 note or a $100 bill, are exactly what money is all about. We can buy groceries, a newspaper, petrol and even a three-piece suite if we have the cash.
You, the buyer, have cash in hand, while the newsagent, the vendor, accepts that your cash is worth something and it can be banked. It’s all about trust. So, while this is all working, we as a society can function.
But, what happens when that trust is eroded to the point of breaking? What happens when we view cash as having little or no value? Many of you who read these pages will know I am an advocate of cryptocurrencies. I “invest” in things like Bitcoin, Cardano, Reserve and VeChain. Along with many my age and with the younger crowd, working with cryptocurrencies no longer feels alien or weird.
I would use the analogy of the cash machine. When ATMs were first introduced to Scotland, that was ground-breaking technology. Punching a code into a machine that recognised you, trusted you and provided you with your cash quickly and with a receipt was pioneering within banking.
Cryptocurrency is the next iteration of this old bank technology. But, hey, it will never catch on, right? Businesses will never want to deal in such hocus pocus. Right up until now…
Wall Street in New York City is all about banking, cash, money, investments, and wealth. Stock market updates swirl around neon banners on the corners of big buildings. The Dow, The Nasdaq, commodities all matter in this city. Banking and trading is at the core of this global financial district. The US dollar is king and as the global reserve currency it knows it.
Big banks like JP Morgan Chase and Bank of America dominate. Yes, it has been safe to say that cash is king here. Well, that may not be strictly true as a tremor rocked the Big Apple last week. A Nasdaq-quoted business analytics company decided it wanted to change how it banked. In short, it swapped its $250 million cash reserves from US dollars into Bitcoin.
What this signalled is that the trust in the US Dollar, banking or fiat currency is under threat. MicroStrategy is the largest independent publicly traded business intelligence company in the USA. Three months of strategising on gold, silver or Bitcoin resulted in this pioneering company buying 21,454 Bitcoins or 0.1 per cent of all available Bitcoin.
There will only ever be 21 million bitcoin “minted”. And this helped this Goliath decide to repurpose its corporate treasury programme from cash on its balance sheet to cryptocurrency. This is huge in the crypto and traditional banking world. Not least for the investors in MicroStrategy. It trusted Bitcoin over cash as macroeconomic factors such as the Feds’ money printing and banking uncertainties were taken into account.
This will not be the last big corporation to consider and execute a cryptocurrency move. I predict major announcements in coming months as confidence in the trust we place in banks and cash dwindles. Historically for bankers, cryptocurrency was the devil.
But consider this. JP Morgan is now providing banking for the one of the largest cryptocurrency changes in the world – Coinbase. So, while our banks still look after our cash, there is a sea change taking place in some spaces in corporate America. Cryptocurrency and Bitcoin just got a big leg-up. Perhaps Scotland should now have a real good think about where it wants to be positioned in the next 25 years.
Jim Duffy MBE, Create Special
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