From the International Monetary Fund (IMF) to some of the leading market watchers in our region, the general feeling is that cryptocurrencies are going to continue to boom and will become a significant part of the global banking sector.
Speaking at a conference in London recently, IMF Managing Director Christine Lagarde told delegates that one day citizens may prefer virtual currencies, since they potentially offer the same cost and convenience as cash, with no settlement risks, no clearing delays, no central registration and no intermediary to check accounts and identities.
Ms Lagarde also suggested that cryptocurrencies may be the answer for many countries with currency issues.
“For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country – such as the U.S. dollar – some of these economies might see a growing use of virtual currencies. Call it dollarisation 2.0,” she said.
“IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential.
In the Seychelles, for example, dollarisation jumped from 20 percent in 2006 to 60 percent in 2008.
“And yet, why might citizens hold virtual currencies rather than physical dollars, euros, or sterling?
Because it may one day be easier and safer than obtaining paper bills, especially in remote regions.
And because virtual currencies could actually become more stable,” Ms Lagarde added.
We are already seeing local nations opening the doors to Blockhain technology and cryptocurrencies to help sole foreign exchange issues.
The Bank of PNG for one has been very bullish on Blockchain technology and has even discussed creating its own cryptocurrency, the BitKina.
TechInvest asked a number of specialists from around the globe what they thought of the cryptocurrency revolution, whether it had reached its peak and where things may be headed in the future.
New York-based cryptocurrency marketing and business consultant, Chris Blechschmidt, says cryptocurrencies aren’t even close to reaching their peak.
“The current situation that we’re in is akin to the state of the Internet in the early 1990s when the World Wide Web was just being born. At that point, anyone who said out loud that in 10-20 years, every company in the world would have a www in front of their name and that we’d be using our phones to surf their websites while walking down the street would have been laughed out of the room,” Mr Blechschmidt responded.
“It’s important to realise that Bitcoin and cryptocurrencies represent as much an intellectual revolution as they do a technological revolution. To truly understand Bitcoin, a bit of an ‘epiphany’ on the nature of money is required. It’s a difficult hill to climb, but once more people surmount it, then exponential growth is sure to occur,” he added.
Tulla Private Equity Group CIO, Kevin O’Hara, also believes that Bitcoin hasn’t reached its peak.
Bitcoin is a finite currency and as such, it is like a land locked property area. Provided the ancillary services and attractions are in demand, the land will always go up! – Tulla Private Equity Group CIO, Kevin O’Hara
Nikola Korbar a cryptocurrency professional and founder/CEO at DigitalMoneyPulse, also suggests that cryptocurrency has a long way to go.
He believes the entire cryptocurrency industry is still in its infancy and likened it to the car industry in the 1920’s.
“Today’s estimates are that approximately 10 million people in the world are using
cryptocurrencies, and when we compare that number to a global population of more than seven billion people, it is clear that the market is just scratching the surface.
“I believe that most countries will, over time, turn to national cryptocurrencies, and we are witnessing several projects of that kind being developed today,” Mr Korbar said.
However, he also issued a warning.
“Cryptocurrencies still have a long way to go, but we need to pay special attention to the regulatory aspect, as most countries are likely to try and tackle the anonymity which is often abused today (from money laundering and tax evasion to more deadly uses like terrorism funding),” he added.
Moneco Group Director Paul-David Oosthuizen is another that believes that Bitcoin for one is no-where near its peak.
“I don’t believe we are anywhere near mass adoption of Bitcoin or any other cryptocurrency for that matter,” Mr Oosthuizen commented.
“In 2016, Coindesk reported that there are approximately 14 million Bitcoin Wallets in use and EtherScan reported over a million Ether Wallets.
With the increase in adoption of late, one can safely assume these numbers have increased drastically, but with individuals being able to create multiple wallets, it is impossible to get an exact figure on how many people actually own these cryptocurrencies.
Even if one was to double the combined figure to approximately30 million users, that is still only approximately 0.4% of the global population between 15 and 65 years of age.
“Mizuho Bank in Japan is spearheading the potential creation of the ‘J-Coin’ which will be a cryptocurrency pegged to the Yen. If they successfully launch this project, they’ll be able to offer the currency to their clients which equate to approximately 26 million households in Japan.
“So in effect, this single cryptocurrency has the potential to double the amount of global cryptocurrency users should they have a 100% uptake and assuming none of these households already have cryptocurrency Wallets. All of this is based on assumptions but it shows how insignificant the current adoption rates of cryptocurrencies are,” Mr Oosthuizen said.
Paul Webster, Managing Director & CEO at International Investment Service, added a word of caution.
“The concern of cryptocurrencies lies in the ability to move funds between unknown counter parties and across national borders. Whilst these abilities exist, US and EU regulators will be hesitant to make it mainstream, limiting its economic integration. Recent events across Europe reinforce this position,” Mr Webster said.
“The Japanese announcements recently goes someway to balancing risk and innovation (with a direct link to an individuals formal bank account). The rest is a speculative trade.
“For those who like high risk sport, enjoy, for those who don’t like risk…limit your exposure,” he concluded.
ICO regulation a major issue
There has also been a lot of discussion about the use of Initial Coin Offerings (ICOs) and their use as a capital raising option, a matter the ASX is examining closely.
Nikola Korbar, a cryptocurrency Professional and CEO at Center for Economic Research Belgrade (CEIB), says that ICO’s can be good for any economy provided that they are regulated properly.
“Today there are so many entrepreneurs with fantastic ideas for various Blockchain projects, and most of them lack funds to make their visions a reality. If we look back to Nikola Tesla, the primary reason why most of his ideas died with him is because
he lacked funds to turn them to reality.
It is every government’s duty to its citizens to enable them to make positive contributions to society, and I believe that ICO’s are one of them.
“However, we cannot ignore the fact that there will always be individuals as well as groups who have no such interests, but who seek only to fill their own pockets, no matter what the cost it may bring to others. Such fraudsters usually turn to cryptocurrencies, and governments and cryptocurrency professionals need to work together to minimise the threat from such risks.”
Kevin O’Hara from Tulla also warns that ICO’s need close monitoring.
“ICOs create a new method of raising capital, but at this stage lack the regulatory governance to ensure investors are protected.
“If retail investors are going to be investing in ICOs then there needs to be a regulatory body that is in place to ensure that the highly skilled and advanced computer specialists are not able to take advantage of the retail investors lack of
Paul-David Oosthuizen says Australia in general isn’t the first place that comes to mind when he thinks of ICOs, as he believes the country has a history of excessive red tape and a lack of understanding and support for innovation from government.
“ICOs do however offer the opportunity to raise funding or pre-sales from an alternative capital source, specifically from the world of cryptocurrencies,” he told TechInvest.
“Traditional routes of capital raising, be it angel investors, venture capital or public offerings, very rarely give one the option to acquire crypto.
For some businesses cryptocurrencies allow hedging against foreign exchange as well as a host of other benefits, so yes ICOs can be positive for Australian businesses and ultimately the economy.
“Though the concept of ICOs can’t ever be defined as being ‘bad’, this medium of fundraising does lend itself to abuse from undesirable characters and opportunists.
I believe we’ll read about a lot of horror stories of individuals who lost a lot of money from ‘investing’ in ICOs, hopefully very few, if any, will be Australian projects, but I am certainly of the opinion that there are a ridiculous amount of ICOs out there that are complete rubbish and plenty that are scams.”
Jamie Skella, Co-Founder at Horizon State, believes ICOs have the potential to do great things for every economy.
“ICOs democratise investment and create wealth generation opportunities for the masses, instead of just venture capitalists and high net worth individuals; instead of just making the rich richer.
“Of course, there does have to be some regulation – we do need some low barriers introduced – to protect consumers from scams, of which there are currently many.”
Blockchain and ICO specialist, Product lead@ Zohem and Co-founder @Inthinks, Sunil Sharma, says the ICO market has expanded at an unprecedented rate.
“So, pros and cons will arise, but in my opinion ICO’s have at least paved a way to look for alternatives other than conventional funding options,” Mr Sharma commented.
“Think about the ideas like Golem, Gnosis, Siacoin etc., the materialisation of these ideas would have never been possible without the concept of ICO. It is hard to predict the future, but the market is maturing and the country govt. are taking it seriously now.
“The awareness of the concept is also increasing and these two factors in the long run will curb the scams and frauds. The ICO’s after all this chaos are finally striving for what they were meant for ‘crowdfunding’.”
So while the support for continued strong growth for cryptocurrencies is overwhelming, it appears that there is some measure of thought that ICO’s still have a way to go to gain the full trust of regulators and the market.