Bitcoin – Pitfalls or Potential?
THE BITCOIN BUBBLE MAY BURST, BUT THAT DOES NOT MEAN THE VIRTUAL CURRENCY – AND THE TECHNOLOGY THAT SUPPORTS IT – WILL DISAPPEAR
Nobel prize-winning economist Joseph Stiglitz wants it outlawed. Billionaire investor Warren Buffett says it will “come to a bad end”. During the early months of 2018, the hitherto wildly fluctuating value of bitcoin appeared set on an inexorable downward trend – with the most famous cryptocurrency losing support as quickly as it sheds value.
But advocates remain. Japanese businesswoman Mai Fujimoto, who goes by the nickname ‘Miss Bitcoin’, told newswire AFP in January: “I convert all my disposable income into cryptocurrency. I have been doing this for nearly a year now. I convert all my savings into cryptocurrency instead of putting them in a bank.”
It is a conundrum. Experts around the world warn of the imminent burst of the bitcoin bubble, and many governments are openly hostile to its very existence. But enough ‘Miss Bitcoins’ have bought and traded the currency to take its value on a wild and unpredictable ride.
Short-term speculation certainly plays a large part – although Mai Fujimoto started using bitcoin to cut out bank fees when sending money abroad. For all the anxieties around its reputation as the payment method of choice for criminals and terrorists, there are legitimate reasons for ordinary people to use a decentralised currency, free from the control of banks and governments.
JAPAN LEADS THE WAY
Some countries have recognised that fact. In April 2017, the Japanese government passed a law recognising bitcoin and other virtual currencies as legal tender. Morito Saito, senior vice president of UHY FAS Ltd in Tokyo, believes that several factors have helped to give bitcoin legitimacy in Japan.
“Firstly, Japan’s Financial Services Agency (FSA) started regulating bitcoin, and that led to its credit rising,” says Morito Saito. “The FSA issued a licence to cryptocurrency exchanges, also requiring them to have minimum capital reserves and anti-money laundering checks in place.”
With official sanction and oversight, bitcoin’s credibility rose. Morito Saito says that another decisive factor was the decision of several leading financial institutions – including major Japanese banking groups SBCC Venture Capital, Mizuho and Mitsubishi UFJ Capital – to invest in Bitflyer, the country’s leading bitcoin exchange.
“Major retailers, such as Bic Camera and Marui, started partnerships with Bitflyer, which also raised the credibility of bitcoin,” he adds.
In fact, this raised bitcoin’s credibility to the point where, today, a number of major Japanese retailers accept bitcoin payments, and at least one company has offered to pay part of its employees’ salaries in virtual currency.
In the Ukraine, by contrast, the focus is as much on bitcoin mining (the process of creating bitcoins by using special computer equipment to solve complex mathematical problems) as investing.
Alexander Koinov, managing partner at UHY Prostor Ltd in Kiev, says: “The mining of cryptocurrency is very profitable in Ukraine, because the price of electricity for businesses is very low, and there are many suitable and cheap premises and technically well-educated staff.”
Read the full article in the most recent issue of UHY Global
UHY Global goes digital!
In this issue of UHY Global we look in detail at:
- DIRECTION OF TRAVEL – The changing face of global tourism
- PITFALLS OR POTENTIAL – The uncertain world of bitcoin
- THE RISE AND RISE OF THE ELECTRIC CAR
- IS THERE AN APP FOR THAT? – Keeping up with the Fintech revolution