What a Senate Hearing Means for Bitcoin

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What's This?

Is a world currency about to take hold? Will startups come to see digital currencies, like the often misunderstood Bitcoin, as the only means of accepting payment for products and services? Well, not exactly. The reality is that a lot has to happen before global markets, businesses, and everyday consumers gravitate to a single currency–digital or otherwise.

However, recent events emerging from the Digital Currency Senate Hearings offer some intriguing developments into the future of virtual currencies.

First, before defining the impact of virtual currencies on new startups, it’s best to start by explaining exactly what virtual currencies are and how they are measured. Invariably, this involves discussing the most prevalent virtual currency: Bitcoin. What exactly is Bitcoin? Well, depending upon who you ask, it is either an investment, traded like a commodity on an exchange, or a legitimate, decentralised currency not under the control of any world authority.

Bitcoin’s value is based upon what people are willing to pay for them, relative to a complicated and convoluted mathematical algorithm that defines its value on the global market. Does this all sound all too confusing? If so, then just imagine a global currency that can be converted into other paper currencies, one where the global currency’s value isn’t controlled, dictated or influenced by any one government or any single world monetary authority.

The Long Road Ahead

What impact, if any, will Bitcoin have on startups? Well, it depends upon the startup and its willingness to accept Bitcoins as a means of payment. Tech-savvy business owners may just see the virtual currency as a legitimate, albeit trendy, means of payment. However, the reality is that Bitcoin, and any other virtual currency for that matter, has a long way to go before being widely accepted by consumers and businesses as a viable currency.

Or does it?

One recent event points to both Bitcoin’s potential, and the long road ahead. The first Bitcoin ATM was installed on October 29, 2013 at Waves Coffee House in Vancouver. However, a single ATM is not enough to support everyday consumers and businesses. While it’s traded internationally, and is a viable means of online payment, Bitcoin has much to accomplish before it becomes user-friendly for consumers and businesses.

Recent Events From the Senate Hearing

While it has yet to be officially endorsed by US government regulatory authorities, there is a consensus building that Bitcoin’s value and relevance can no longer be ignored. Mythili Raman, the acting assistant attorney general for the Justice Department’s Criminal Division, stated the following at the Senate hearing: “We all recognize that virtual currencies, in and of themselves, are not illegal.” In addition, the current Chairman of the Federal Reserve, Ben Bernanke, stated that Bitcoin “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

Granted, neither of these aforementioned statements are the types of ringing endorsements Bitcoin advocates were hoping for. Ultimately, they point to the time needed to define the currency’s legitimacy. However, it does demonstrate the conundrum facing today’s governments: Should they treat Bitcoin, and other digital currencies, as legitimate, or as black market currencies simplifying payment for illegal activities?

Unfortunately, Bitcoin has a reputation for being the preferred method of payment for corrupt transactions. Several sources, including the Secret Service, the Financial Crimes Enforcement Network, and the Justice Department’s Criminal Division, testified at the Digital Currency Senate Hearing to Bitcoin’s use by corrupt individuals looking to keep their transactions secretive. A perfect example was provided by the president of the International Centre for Missing and Exploited Children, Ernie Allen when he stated that “child pornography is currently being created and disseminated using technologies and using virtual currencies for payment.” Yet, others testified that Bitcoin shouldn’t simply be viewed as a means of hiding illegal transactions.

Ultimately, Bitcoin, and any other virtual currency in existence, is not yet widely accepted as a means of payment in today’s global marketplace. Inevitably, this currency will come face-to-face with government regulatory authorities who will face a difficult decision: Should they try to regulate its use and control its supply, thereby influencing some control over its volatility, or simply allow it to thrive and bring some stability to a world economy where third world countries have less than stable currencies. Ultimately, these questions need to be answered long before startups consider digital currencies a viable means of payment.

 

Written by By Ilan Nass, Fueled, the premier agency for iPhone app design and Android app development in New York City.

 

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About Author

I love gadgets and technology, so i write about them. +Tomi Adebayo

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