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Many believe we have reached an important fork in the crypto path. Take the right turn and
it will lead governments, old school financial institutions and Fortune 500 blue chips to a
promised land enhanced by blockchain.
Take the wrong one and you enter a world of multiplying virtual currencies driven by
scammers, spivs and crypto-hustlers who – in league with narco-felons, anarcho-techies
and money-laundering Asian billionaires – are apparently leading the whole circus along a
treacherous path beset by bad press, tightening global regulation and jail sentences.
A review of this week’s crypto-related news would suggest the quandary is real.
On Monday, Japan’s financial regulator said it was going to inspect all cryptocurrency
exchanges after hackers carried out the biggest cyber heist in history, stealing US$530
million worth of digital money from the Coincheck exchange.
Then, on Tuesday, South Korea brought in a ban on anonymous cryptocurrency trades in
an attempt, it said, to stem rampant speculation and money laundering. On the same day,
news stories circulated that federal judges in Brooklyn are starting a sequence of cryptorelated
court proceedings. These trials will attempt to formally define cryptocurrencies and
see if they can be regulated inside the US – meaning that these “virtual tokens,” would, in
effect, be governed by the same rules as stocks and bonds.
Both moves, in Seoul and New York, will, ultimately, bring more transparency and
jurisdictional control. Of course, this meant global cryptocurrency markets went tumbling.
The price of bitcoin fell to a three-year low.
Then, on Wednesday, Facebook announced it is banning advertisements about
cryptocurrencies because it says consumers are being misled and deceived by them.
Thursday bought Indian finance minster Arun Jaitley’s annual budget speech. He used it to
confirm that his government will do everything it can to stop the use of bitcoin and other
virtual currencies. In his speech, Jaitley dismissed all cryptocurrencies as Ponzi schemes.
The crypto markets fell further.
But meanwhile, back on the blockchain side of the street…Last week we heard that the
busiest sessions at Davos – aside from the US President telling a packed hall that “America
first is not America alone” – were the blockchain-related ones. For instance, there was
Laurent Lamothe, the former Prime Minister of Haiti, explaining to his Davos crowd how
blockchain can aid governments during national catastrophes.
We also heard the news that the EU has just launched a US$400 million blockchain
research fund. And about how blockchain could slice a significant chunk off remittance fees
for the world’s 250 million economic migrants, something the World Bank estimates could
save billions. There was also the story about the IBM-backed Hyperledger Fabric project
that is working with heavyweights like Deutsche Bank, HSBC, Rabobank and Unicredit to
overhaul the time and costs associated with global banking.
So, blockchain good, cryptocurrencies bad: is it true?
Well, take the example of Ripple, the company behind the much-hyped cryptocurrency XRP.
Ripple Asia last week formed a joint venture consortium with Japanese investment house
SBI that will work with 18 securities firms to research and commercialize blockchainfocussed
“emerging technology applications.”
This comes after Ripple formed a consortium last year with 60 of Japan’s biggest banks that
is working to leverage the San Fransisco start-up’s blockchain technology in the area of
instant payments and settlement.
Ripple’s story is just one example of clever “token tech” starting to work in the mainstream
financial world and as such does indicate that it may be too early to start ringing on that
cryptocurrency death bell. There is also the not inconsiderable point that millions of people,
who are not blood-thirsty, dark-web prowling terrorists, have a lot of love for
cryptocurrencies, especially millennials who feel disenfranchised with an established
financial system they see as exclusive and unrepresentative of their wants and needs.
There is also another point. Actually THE point. People are still making an awful lot of
money out of cryptocurrencies.
Last week, the English Premier League football club Arsenal announced it had its “first
official cryptocurrency partner.” Cashbet, an online gambling site, is currently seeking to
raise in excess of US$40 million from the sale of “CashBet Coins,” a form of virtual token, in
its fund-raising “Initial Coin Offering.” These tokens will initially be priced at US 50 US cents
and are designed to be used on CashBet’s plethora of mobile phone gambling apps.
Arsenal, for an undisclosed fee, has allowed the gaming company – which is based in
California but holds an online gambling license in Alderney, a tiny British Crown dependency
island in the English Channel with a population of around 2,000 – to use the club logo on its
website and promote its services at all home games.a
The English Premier League is hugely popular. It is televised live every week in more than
200 territories and has a global audience in the billions. And in this world, Arsenal sits very
much in the mainstream – it is, perhaps, England’s most “establishment” of football clubs. In
reporting the CashBet deal, however, the BBC chose to highlight not only concerns around
gambling in sport but also the UK government’s warnings that ICOs are “high-risk,
speculative investments.” Published in Daily Times, February 5 th 2