Bitcoin Continues Its Slow Emergence as a Currency
Bitcoin — the so-called cryptocurrency that exists only in digital form — is having a pretty good month when it comes to gaining regulatory acceptance and a slightly more mainstream profile.
As much as bitcoin remains unknown by the vast majority of people — most of whom are quite happy with current methods of exchanging payment for goods and services — its growing prominence makes it only a matter of time before it becomes a “thing.”
And now a couple of recent developments have inched bitcoin closer to that day.
The latest big news on bitcoin comes courtesy of the New York Department of Financial Services, which just granted a banking charter to the Winklevoss twins’ bitcoin exchange, Gemini Trust Co.
In case you missed it or just don’t care (good for you!), the Winklevoss twins are the entrepreneurs made famous after their lawsuit against Facebook (FB) was made into a pretty entertaining movie.
The Winklevoss twins have since founded Gemini Trust, which will open for bitcoin trading on Thursday now that it has a charter from New York’s financial regulator.
Gemini is not the first bitcoin exchange to be granted a license in New York state, but the public stature of the Winklevoss twins probably makes it the most important, at least in terms of advancing the currency in the public mind.
More Regulatory Oversight for Bitcoin
An even more important bitcoin development occurred less than a month ago. In a critical move, a federal regulator gave bitcoin increased credibility by putting it on essentially the same footing as gold, oil and pork bellies.
In mid-September, the Commodity Futures Trading Commission designated bitcoin as a commodity. Not only does that give the currency more legitimacy, it opens up the potential for creating complex bitcoin-based derivatives and other products.
More happily, the CFTC designation offers investors increased protection from dirty dealings in the bitcoin marketplace.
And yet for all the progress bitcoin has made with U.S. regulators recently, it’s still facing stiff obstacles at home and overseas.
Bitcoin is anonymous, and that makes it an attractive method of payment for illegal goods and services. Such concerns have made it a flop in Australia, for example. Businesses won’t accept the currency and the nation’s banks recently shut down 13 of the country’s 17 exchanges.
In another setback, the National Bank of Ukraine recently warned of the dangers of bitcoin. The fact remains that most mainstream banks in Europe and the U.S. don’t accept bitcoin-affiliated accounts, Reuters notes.
Given its complexity, opacity and criminal utility, bitcoin has a long way to go before it competes with good old fiat currency. People have enough trouble balancing a checkbook; just try explaining what bitcoin is to them.
And then there’s the biggest hurdle bitcoin has to jump: force of habit. Humanity has been using coins and paper money for thousands of year.
That said, you know bitcoin is slowly emerging as a currency when regulators are forced to acknowledge its popularity and potential for fraud.