Reforming the Reputation of Cryptocurrencies

November 15, 2017         By: Ben Jones

Last week, economist Barry Eichengreen said that cryptocurrencies like Bitcoin and Ether serve as “a vehicle for money laundering, tax evasion and the like”. Strong words, but he’s not alone. Jamie Dimon, chairman and CEO of JP Morgan Chase, has referred to Bitcoin as a fraud and people who invest in it as stupid.

With comments like this, it’s hardly surprising that cryptocurrencies have a bad reputation. Even so, the prices keep rising and more investors keep getting involved. Which hasn’t gone unnoticed at the world’s biggest online retailer.

Just last week, Amazon registered three crypto-related domains that suggest it may be moving towards accepting cryptocurrency payments. More and more, the old world order of finance seems to be in conflict with the new world order of technology over digital and cryptocurrencies.

If there is a choice to be made, I for one will be following the lead of the tech giants. However, I also believe there is a middle ground where both worlds can co-exist. For this to be possible though, we need reform the reputation of cryptocurrencies by moving beyond the narrative of negativity and better understanding how collaboration and transparency can bridge the gap.

 

Cryptocurrencies won’t replace flat currencies

This is probably the biggest myth that needs to be busted as soon and as loudly as possible because it results in a reluctance to collaborate. Unless you believe that the whole governmental, social and economic systems of the US, Eurozone, China, Great Britain and Japan will collapse entirely, then the fiat currencies they control will not either.

I believe that all of these currencies will continue to exist alongside cryptocurrencies. Not only that, I think we’ll see more cross-pollination of fiat currencies and cryptocurrencies as the established ones take on the best features of new ones. We are already starting to see that in Japan, where the J Coin is an attempt by major banks to wean the population off cash.

What’s most likely is that many more consumers will need to access and trade a number of fiat and cryptocurrencies, and solutions that serve this need will be useful. Currently, individuals are stuck between wanting to get involved and finding that the onboarding process for doing so is slow, cumbersome and prohibitive.

They can wait days to exchange fiat currencies for cryptocurrencies, or vice versa, in order to start trading or convert profits and the whole industry needs to work at drastically reducing the wait.

 

Know Your Customer processes are well established

This is another area where a lack of knowledge about the current situation with cryptocurrency trading has served to diminish the reputation of the whole industry. A few years ago, when regulation was much looser than it is now, there was a lot of talk about how KYC checks wouldn’t work for Bitcoin. Now, you’d be hard pushed to find an exchange that allowed you to trade without mobile phone verification and the submission of at least two forms of personal ID.

Of course, a quick search through reddit tells you that there are still people looking for exchanges without KYC procedures and you have to wonder what they’re up to. But these are the rotten apples you find in all systems. Significantly, the move by China to shut down cryptocurrency trading, which added to the negative perception of the industry earlier this year, looks likely to be reversed with KYC checks being a key part of the new framework.

The industry as a whole should be promoting what is the correct process for KYC through whichever means necessary, whether that’s the sign up journeys on individual exchanges or group communications about best practice.

 

Crypto-collaboration can fill finance gaps

While the scope and depth of existing financial and banking systems is one of the reasons they’re unlikely to disappear, it’s also one of the reasons that they’re not best placed to serve some customer needs.

As an example, international money transfers are slow and expensive between banks and traditional payment providers. This can mean they’re out of reach for the 3.5 billion consumers around the world that are unbanked or underbanked, even though these communities often need these services most. However, cryptocurrency payments across borders are fast, cheap and hassle free, making this sort of service available to many more customers.

Of course, banks are not the only players involved in payments these days and, as mentioned, tech companies are starting to take a different approach. As well as Amazon’s potential move, we’re also seeing Facebook embrace easy digital payments through Messenger.

The role of payments providers is crucial because of the way that crypto-businesses are currently penalised, with some having their bank accounts shut down for simply handling cryptocurrencies.

Collaborations do exist between the industries and these should be highlighted more clearly to demonstrate the positive side of how we can work together. I believe both sides of the divide will exist in the future and a collaborative approach, based on solving customers’ problems, will be the best way to close the gap.


About The Author

Ben Jones is the CTO and Co-Founder of Bitwala – a Berlin based crypto startup building the world’s first crypto bank account.