Despite all the challenges facing the bitcoin industry these days, cryptocurrency enthusiasts continue to believe that significant progress is being made. Political activist Russell Brand (Yep, the British comedian who broke Katy Perry’s heart. Same guy.) even claimed that an alternative currency would be an integral part of a global financial revolution. Should forex traders be worried about bitcoin replacing traditional fiat currencies?
Bitcoin Regulation Underway?
Now I’m not too sold on the idea of bitcoin shaking things up in the monetary arena just yet, as digital currencies could have difficulty gaining traction with New York’s BitLicense set to be implemented. This regulation has been proposed by the New York State Department of Financial Services (NYDFS) back in 2013, has been opened for several rounds of community feedback, and has undergone several revisions before NYDFS superintendent Benjamin Lawsky announced that it would be finalized soon.
Apart from potentially regulating bitcoin wallets and exchanges, BitLicense could also require cryptocurrency firms to obtain licenses for all their bitcoin-related products. This raises the very important issue of funding, particularly for startup companies, as gaining regulatory approval could be a costly and time-consuming process. Heck, even efforts to secure funding from venture capitalists or private investors could be subject to BitLicense approval!
In the United Kingdom, the government has also revealed a series of initiatives to ramp up their oversight of the cryptocurrency industry. In particular, the U.K. Treasury plans to scrutinize bitcoin exchanges for potential money-laundering activities. Aside from that, the British Standards Institution also plans to collaborate with members of the bitcoin community to come up with measures for consumer protection.
Other countries have been less open-minded about the cryptocurrency, as Russia even announced a complete ban on bitcoin activities. Government officials have already begun cracking down on bitcoin exchanges last year and have been shutting off access to websites that provide information on cryptocurrencies. Iceland has also implemented a ban on bitcoin and other cryptocurrencies, as their existing legislation indicates that their national currency cannot leave the country’s borders. In Vietnam, financial institutions are not allowed to hold bitcoins and any businesses using the cryptocurrency could be subject to penalties.
Increased Support from VCs
Perhaps the biggest reason why bitcoin startups are able to thrive is that venture capitalists have been increasingly supportive of these initiatives. As shown in CoinDesk’s State of the Bitcoin report for Q1 2015, VC investment for bitcoin companies have surged 51% from the end of 2014 to a total of $676 million to date. Industry experts remarked that, at this pace, VC funding for bitcoin startups this year could surpass the $638 million level invested in the early internet startups nearly a couple of decades ago.
Influential folks in the online arena such as co-founder Netscape Marc Andreessen have been dubbing the cryptocurrency as the “Internet of the 21st Century” as it also arrived as a “fringe technology” before eventually gaining mainstream acceptance. For Andreessen, the increased interest of investors in bitcoin proves that it has been able to shake off the negative reputation of being associated with drug dealings and criminal activities.
The Role of Bitcoin
Interestingly enough, the role of bitcoin appears to be shifting from being a financial investment to its function as a payment vehicle. After all, its price has been steadily declining since last year and industry efforts seem to be more focused on enhancing bitcoin transactions and money transfers. Moving forward, analysts predict that there could be an increased interest in the more practical applications of blockchain technology rather than bitcoin mining activity.
Do you think bitcoin will continue to see positive developments and eventually replace traditional currencies? Share your thoughts in our comments section!