Over the few short years in which it has risen to prominence, Bitcoin has acquired its fair share of connotations, fair or not, in the public eye. It is generally seen as something ‘nerdy’; a product of obscure coding originated by super technophiles in basements. It has come to be associated with the increasing cultural dominance of online life. It is also – understandably, given its past behavior – associated with risk and volatility.
There is another connotation, however, that should be more prominent. That connotation is ‘revolutionary’. Bitcoin, and the wider concept of digital money that bitcoin represents, holds tremendous potential to transform our expensive, inconvenient and spasmodic global financial systems for the better. The central reason for this, like many revolutionary ideas, is surprisingly simple. Virtual currencies such as bitcoin allow for the instant, convenient exchange of value, without the need for any intermediary or central banking authority.
Our current financial system is neither innovative nor self sustaining because it is run as national monopolies. Too much power is contained within too few institutions, and these institutions are largely shielded from the disruption and competition crucial to a healthy capitalism. This had led to a proliferation of middle-man fees levied on value transactions. The end result is an opaque system of money in which the common person doesn’t feel they fully control their own wealth. Virtual currencies hold the promise to turn this all upside down: to introduce true competition to the world of money, to inject transparency into wealth transfers worldwide, to eliminate unnecessary fees, and ultimately to give the under-banked and un-banked of the world access to the global financial system.
George Osborne may well be onto something in thinking that London could lead the charge in this area. The emphasis on transparency fits squarely with the wider agenda of its policymaking institutions. Bank of England Governor Mark Carney has made crystal clear the City’s commitment to innovation and reform within finance. The post-crisis world is a post-trust world, but London is the only major international financial hub that seems to fully appreciate this new reality. As a tentative global recovery takes hold, it is the only financial centre that is still grappling with the very real problems that triggered the crisis and yet continue to linger. Namely, a lack of transparency, and blind commitment to conventional ways of doing business.
The FCA’s recently launched Project Innovate is further testament to the UK’s refreshing attitude. This program will help small, disruptive firms gain authorization on a fast-tracked basis. Quite apart from placing barriers in the way of these firms, London is actively seeking to give them a boost.
Furthermore, the UK is seeking to embrace the change rather than run in fear, particularly in recent times. Osborne optimistically opines: “These alternative payment systems are popular as they are quick, cheap and convenient.” The report, expected in Autumn, could pave the way toward a new regulatory framework for cryptocurrencies in the UK. In line with this attitude, HMRC has signaled its intention to treat bitcoin as a mainstream currency for tax purposes, canceling plans to charge VAT on bitcoin trading.
The Government’s open attitude to the emergence of digital currencies is being matched by activity in the private sector. A number of exciting bitcoin related businesses are similarly making their home in the UK. Elliptic Vault – the first ever company to offer an insured bitcoin storage service – recently received a £2 million injection from UK-based investment firm Octopus. And UK-based Coindesk – the world’s premier informational hub for all things bitcoin – is launching a first-of-its-kind bitcoin sentiment index.
It is this vibrant environment, set against the wider context of reform and innovation, which has attracted us to London for our second round of fundraising. Uphold is built on the belief that bitcoin, and digital money in general, can make the world fundamentally fairer and more open. Our service is built to allow anybody to instantly transfer value anywhere in the world using bitcoin easily, instantly and void of any bank transfer fees – a luxury previously afforded to the few.
The trick in making this work, of course, will be to eliminate one of bitcoin’s more negative (and, to be fair, well deserved) connotations: that of its volatility. Volatile money is no money at all. Stability and the trust that comes with it will be crucial for there to be any hope of a day when people routinely use bitcoin in the course of everyday life. This is our mission at Uphold, the principle underlying our business model – we seek to provide a way for the everyman to reap the benefits of digital currency whilst shielding them from any and all volatility.
This journey has only just begun, but London already has a significant head start thanks to its broader commitment to transparency and accessibility in the world of finance. London is well on the way to becoming the bitcoin capital of the world, and we are well on the way to a new era of transparent money.
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