Hilarious article from The Telegraph.
The Bitcoin bubble will burst. It's time for a 'Bitpound'
Bitcoin is enjoying unprecedented growth this year, but its value fluctuates widely Credit: Dan Kitwood/ Getty
As I write, Bitcoin is trading at a new high of £6,305. If you had bought one Bitcoin in September, you could by now have made £3,860.
The relentless rise of Bitcoin - a digital currency that can be used to store and save money privately, without the need for banks or names - has defied all expectations. Some have even wondered if the financial experts who have called it 'a fraud' were being deliberately disparaging to protect their own interests.
Bitcoin has given good return to investors, but make no mistake: this is not a bonafide currency, and those who buy it are taking a mighty roll of the dice.
Sweden has put serious thought into launching its own digital currency; China’s central bank is actually testing a prototype
For a start, its value fluctuates widely. The current rally comes on the back of a steep fall last week that saw prices fall to $5,500. So, in a single week, its value increased by 47 percent. If your savings were in Bitcoin, you would go to bed not knowing if you'll be able to afford a Bugatti or just a baguette the next day. The constant fluctuations also mean Bitcoin cannot be used to price goods. And it is worthless as a medium of exchange as hardly anyone accepts it and even when they do, it costs up to $12 per transaction and can take hours to clear.
So, hype aside, Bitcoins are lottery tickets. They have no underlying utility. When the music stops, those left holding them will be burned.
One potential remedy is for central banks to issue their own digital tokens, to show what a real e-currency should look like. A BitPound would have the same value as cash and be backed by the Bank of England, making it stable and universally accepted. Sweden has put serious thought into launching its own digital currency; China’s central bank is actually testing a prototype.
So what could it do for us? Our economies are moving from cash to digital transactions - cards now account for more than half of all payments in the UK, and online payments for more than one in ten. An e-Pound could make these payment systems fairer - because private payment providers wouldn't be able to exploit their market dominance and charge extortionate fees - and better protected from cyber attacks.
With BitPound deposits, there would be no threat of savings vanishing if banks collapse because consumers would have a direct claim on the central bank itself
An e-Pound would also help the UK fight fraud. Transactions would be linked to accounts at the BoE and so there would be a clear trail of all transactions from the moment a new currency is created. Some have even suggested making e-currencies trackable. While this does raise privacy concerns, it would stop everything from minors buying alcohol to money laundering and tax evasion.
Finally, BitPound deposits would be a secure way to save. There would be no threat of savings vanishing if banks collapse because consumers would have a direct claim on the central bank itself.
The problem is that creating this direct link between consumers and the Bank of England could deprive banks of the deposits they use to create loans. Banks, then, would have to redesign their operating models by, say, offering higher savings rates or the BoE would have to recompense them with the proceeds paid back to the public purse.
There are risks and unanswered questions, but it's time to think seriously about a BitPound - to expose private cryptocurrencies for the wild gamble they are, and make an increasingly digital payment system safe and robust.
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