Bitcoin has come a long way since bursting on the scene in 2013. It was then being dismissed as a fad akin to tulip-bulb mania, but surprisingly and ironically, in a twist of logic, the popular, secretive digital currency is being embraced by none other than that bastion of conservative capitalism – Wall Street – a key player in the evil empire it was created to circumvent!
And the prospects for its expanded use are encouraging. Not everyone however, is ecstatic. The potential of it gaining acceptance is roiling certain industries – such as those involved in accounting and music, which stand to lose business because of Bitcoin’s ascendancy and acceptance.
More than just a means of effectively transferring and exchanging money, the technology behind Bitcoin hails the advent of doing business in a new way for a plethora of industries. Instead of being euphoric, though, many Bitcoin adherents, attracted to the technology because it avoided banks and provided a means to store money without scrutiny, are less sanguine about its prospects for popularity. As JP Morgan Chase’s head of corporate strategy opined in saying, Bitcoin is an idea whose time has arrived,
“Now, It is a real opportunity. You test it and realize that this can play a big role in our thinking about how our own infrastructure will evolve.”
He was referring to the way that it could revolutionize online record-keeping and stock and bond transfers, not to mention currency transactions. But, as often the case, one man’s rock is another man’s diamond. There are two sides to this coin for some industries.
For some companies in the music business, which rely on a central record keeper to (among other things) distribute royalties to artists, any system that would circumvent a central ledger is suspect. Alarmingly to the establishment publication Billboard, several start-ups are looking at using a digital ledger to keep track of digital music downloads and distribute said royalties.
To the accounting industry, long a beneficiary of complicated labor-intensive record keeping, the emergence of a system that would preclude their antiquated paper-using methods poses a threat. Add to this mix companies such as PayPal, which have leaned heavily on record-keeping for both sides of its ledgers. But these industries are unlikely to stop the digital drive for increased Bitcoin acceptance.
Now, for many bankers, the question is not if the technology is put to use, but when. Mr Neukirchen, at JPMorgan, is one of many bankers who expect that it will take a few years for the first significant use of block-chain technology to gain traction. Mr White at Barclays expects it even sooner, perhaps even in the next year. If so, the way business is conducted for the transfer of stocks, bonds and syndicated loans (for centuries relying on people- intensive processes) may be turned on its head.
For example, the most intensive work is being conducted by financial exchanges like NASDAQ, which is embracing Bitcoin block-chain technology, and is preparing to roll out software this year based on the system. This will permit the trading of stocks in private companies. Heretofore, that would normally require much paper-shuffling as certificates had to be printed and exchanged – a very labor- intensive exercise. Using block-chain ledger technology would preclude such onerous paperwork, making trading and other transactions faster and cheaper. Nasdaq’s chief executive, Robert Greifeld, said in a July call with investors that,
“We believe that block-chain technology holds great promise in allowing capital markets to operate more efficiently while simultaneously providing greater transparency and security, all of which are fundamental to the public interest.”
This opinion is echoed from the highest peaks of corporate culture, which is gratifying to block-chain technology proponents but it doesn’t detract from the reality that Wall Street’s way of doing business will have to slowly change. But institutions are holding high-level meetings to discuss cooperative means for making the technology more pervasive.
One thing appears certain, that the Bitcoin is here to stay, and may evolve overtime into an accepted way of transacting business. Who would have thought it back in 2013 that such strange, disparate partnerships might emerge from the budding Bitcoin’s birth?