Cryptocurrency is entering a new phase in the fall of 2017. Bitcoin and subsequent cryptocurrencies may be on the verge of transforming the worlds of both IT and finance. For at least the last few years, in fact, conventional wisdom has been that the central bank idea was a dinosaur – if not dead. Bitcoin and deregulated cryptocurrencies would singlehandedly upend the concept, if not the need. Why? Capital could not only be newly minted, but also sent without barriers to any person on the planet with the right wallet.
To some, this new technology is still confusing. But think of it this way. Today, as a result of this profoundly disruptive innovation, all you need to send and spend money is a mobile phone and a cyber wallet. No bank account is required. And increasingly, in the cyber world, you can live your entire life in digital currency.
In addition to that, the sky has seemed to be the limit for minting new cryptocurrencies. ICOs – essentially the digital equivalent of a crowdfunding campaign combined with an IPO – have managed to raise more and more money. While the total amount invested in ICOs is unknown, this year alone the figure has soared into the hundreds of millions of dollars. With that amount of capital flow outside of established systems, the established banking (and regulatory authorities) finally struck back this year.
State governments (such as Washington State), the SEC, and as of this fall, the Chinese government finally weighed in: ICOs can be illegal. Coin exchanges are on the way out. Per the SEC, cybercurrency can also be a security, not just a currency. And while the initiative in Washington failed, the idea of being able to buy anything you want with digital cash is a concept that is now heading towards a showdown with federal banking law in the United States.
Cybercurrency a path to vastly increased regulation: How you can mint and earn it; how you can spend it; and of course, the ability to raise money with it. Part of the reason is that banks want a piece of the action too. Jamie Dimon's latest swipe at bitcoin is not in fact a denigration of all things blockchain. In fact, JP Morgan, like all big enterprise banks these days, is busy interacting with several emerging blockchain-based and even cybercurrency-esque projects.
This also of course includes all things related to smart contracts and tokens. This is sort of the next generation of cybercurrency when it comes to blockchain. The technology beneath it can do all sorts of cool things. In fact, blockchain networks are also the next generation of advanced technology, dispersed energy and automation of the kind that seems to remain in the realm of science fiction today. Manufacturing is also about to get into the game.
In other words, bitcoin, cybercurrency and blockchain are far from dead. However they are clearly coming to several hard forks in the road if the form of regulatory regimes in many countries right now. In other words, banks are going to be a major player in the world of digital currency. It was inevitable that they would be. The question, however is, how much control they or central banks really have in entirely shutting down the entrepreneurial spirit of this new digital market.
The bottom line? They will have influence. In the meantime, know that cybercurrency is not dead. But for the vast majority, it's better not to bet the farm on it – especially this fall.