Cryptocurrency’s rapid growth is a threat to conventional finance
Bitcoin’s astonishing rise in value from $750 at the start of December 2016 to more than $11,250 in December 2017 has lured in more and more institutional investors, disturbed regulators and confounded those in the conventional banking industry that once stove to belittle cryptocurrency.
They can no longer ignore it. Rather, bankers are deploying established financial market techniques – delta-one securities, exchange-traded notes, passive index tracking – to engage with cryptocurrency and allow even more wealthy investors and institutions to join the party.
The sharp sell-off in January, when the market capitalization of the entire cryptocurrency market almost halved in just 10 days, was a sharp reminder of the risks. But while the decline from $830 billion to $430 billion was alarming, remember that the whole market was worth just $17.5 billion 12 months ago.
Recently launched bitcoin futures will bring a new mechanism to short cryptocurrency and so perhaps to manage its notorious volatility, allowing further comfort to institutional investors.
The market capitalization of the 1,450 cryptocurrency tokens now in circulation had recovered to $540 billion in late January – roughly equivalent to that of Bank of America and Citigroup combined – and a whole new financial system is now emerging. Insiders say there’ll be many thousands more crypto-assets as initial coin offerings – many supported by crypto millionaires and billionaires diversifying their wealth – replace venture capital equity as the way to fund blockchain-related start-ups.
The big questions now for governments and regulators is whether cryptocurrencies threaten the stability of the global financial system. Some investors will lose out. In crypto land, code is law. There is no benign central authority to correct obvious mistakes. Cryptocurrency has been stolen and accidentally wiped. Could such losses spiral across conventional financial markets?
Rather than try to ban them, many central banks are now considering launching their own cryptocurrencies. It would be the ultimate validation. It might also be the beginning of the end for conventional banking, if individuals, institutions and corporations all came to have digital accounts at central banks.
Fintech: The cold, hard facts of bitcoin mining
Soviet military bunkers in Kazakhstan and portable houses in Siberia linked up to the plumbing: Bitcoin mining is moving in some interesting directions that will become even more diverse as China cracks down on its domestic industry.
Estonian lender targets London’s fintechs
LHV looks to expand cryptocurrency customer base; UK head sees opportunities for EU banks in Brexit.
G20 ministers wrestle with cryptocurrency oversight
Finance ministers and central bankers at the G20 have called for greater global coordination in their approach to cryptocurrencies, but that looks a remote prospect when different regulatory bodies in the same country cannot agree a strategy.
Ripple India tries to ignore the noise
India threatens cryptocurrency crackdown; Ripple argues it has a remittance model.
Dash aims to be the cryptocurrency that works like real money
The recent price collapse shows how far bitcoin and the rest have veered from working like currencies, but one cryptocurrency just wants to be used to pay for stuff.
Japan’s FSA defends approach after Coincheck fraud
Asia totters on its cryptocurrency stance
Fintech: Up bit creek
Gibraltar plans a regulated crypto exchange
Tend token sale points to a regulated future for ICOs
Bitcoin bonanza: the rise of regulation
The latest cryptocurrency price crash is shining the spotlight on the regulation of these borderless, digital currencies, but the rules differ wildly from country to country; global super-regulator IOSCO is set to make an announcement.
Sideways: Masters of the bitcoin universe
The search is on for masters of the bitcoin universe to rival the bond traders who appalled and fascinated the public in the 1980s.
Alternative awards for the year 2017
The King Canute award for ordering back the bitcoin tide: Jamie Dimon, JPMorgan.
Macaskill on markets: Bitcoin greed will overcome fear
An important step to confer respectability on trading in bitcoin and other cryptocurrencies was taken in mid December when analysts from Deutsche Bank highlighted the role played in the emerging market by male leveraged foreign exchange investors from Japan.
Bitcoin: accept no substitutes
Help is at hand for those investors who find putting their money into bitcoin just not quite risky enough.
Jon ‘Mystic Mac’ Macaskill looks ahead at possible highlights for markets in 2018.
Fintech: Conventional investors tiptoe up to cryptocurrency
As retail and high net-worth investors embrace cryptocurrency, delta one synthetics allow institutionals to allocate to this new asset class, but sceptics say that cryptocurrency is an immature market. They warn that catastrophic losses in crypto could destabilize the regular equity, commodity, debt and currency markets.
Russia and cryptocurrencies: will they, won’t they?
Anyone trying to keep track of attitudes to cryptocurrencies among Russian policymakers could be forgiven for feeling a trifle dizzy going into December.
FX: Cryptocurrency exchanges expand offerings as concerns remain
Bitcoin falls victim to its own success
China’s cryptocurrency ban is not what it seems
Bitcoin reaches fork in road as alternative Bitcoin Gold prepares for launch
CME to launch bitcoin futures
Seven things we learned in Washington – and you won’t believe number five
Investment banking goes crypto
Initial coin offerings suggest financial system fragility
Panic buying of altcoin offerings is an obvious bubble that hints at a far more worrying loss of faith in the world monetary system.
FX: SEC rejects bitcoin ETF but market remains buoyant
Bitcoins you can grab
BitLicense not template for UK, say experts
While accepting that regulation can help increase consumer and business confidence in cryptocurrencies, providers and industry analysts agree that the BitLicense model is not the way forward for the UK.
Fintech creeps up on the capital markets
Celent calls on central banks to issue their own digital currencies
Celent has called on central banks to issue their own digital currencies to help raise inflation and reduce systemic risk
Fintech 2016: Wirex brings blockchain to personal banking
Start-up is growing fast; bitcoin leg cheapens FX conversion.
Banks begin blockchain payment integration
Banks are taking tentative steps to integrating blockchain technology, but so far they have focused on following established payment processes.
Fintech 2016: Safello bridges crypto and fiat currency
FX: Cryptocurrency trading venues snowball
The emergence of new trading venues marks a notable advance in the development of cryptocurrencies, such as Bitcoin, although exchanges vary in their product offerings.
Fintech: Blockchain moves from hullabaloo to hard graft
In the second half of 2015 hype around the potential for shared ledger technology to transform banking rose to a peak. Now comes the hard work as banks and fintech companies seek to put test cases into actual use. As the first practical applications begin to emerge, Euromoney surveys the banking market to ask what’s next for the blockchain.
Rival blockchain services test corporate appetite
Interoperability rather than exclusivity appears to be the likely path to success for corporate blockchain services.
Getting to grips with blockchain
Banks have suddenly cottoned on to the power of the blockchain technology beneath Bitcoin. Inside their own treasuries and innovation labs, and increasingly in collaboration, banks are testing uses for rebranded distributed ledgers to replace their costly, proprietary systems.
Have the banks been caught up in the hype around blockchain, or will it transform the financial system in the years ahead? Have your say, by participating in the questionnaire accompanying Euromoney's investigation.
Regulation: The benefits of blockchain
Banks are suddenly obsessed with potential of the distributed ledger in financial markets, but regulators must make sure it is used in ways that remove collusion and wrongdoing.
Bitcoin: Jury is still out on derivatives
Bitcoin is riding high after a recent European Court of Justice ruling that users in Europe are not liable to pay value-added tax when trading the cryptocurrency. But regulators worldwide are divided on whether it is a commodity or a currency and are still probing the advent of bitcoin derivatives as exchanges flourish to satisfy traders' demand for a wider range of products.
Crypto currencies: Bitcoin options come a step closer
Opportunity for banks same as in FX; Goldman investment ‘a positive signal’.
Exit Bitcoin, enter block-chain technology
Negative publicity around cryptocurrencies such as Bitcoin has deflected attention from the potential of the underlying technology to facilitate real-time – and therefore much cheaper – international payments.
Bitcoin market starts to mature
Interest and use of cryptocurrency bitcoin has undergone a meteoric rise in the past year, but it is now moving away from speculative investments into the real world of cross-border business transactions.
Rising Bitcoin adoption emboldens crypto-enthusiasts
Despite the volatility in its price and its still-limited practical use, an increase in the number of merchants accepting Bitcoin in recent months has ignited optimism among digital-currency proponents.
CureCoin: A cryptocurrency aiming to beat cancer
The CureCoin Forum has teamed up with Stanford University to launch a new ethical cryptocurrency that aims to find cures for common, life-threatening illnesses, such as cancer and Alzheimer’s, by bringing together science and the craze for cryptocurrencies.
Bitcoin: big in emerging markets
Surveys suggest that virtual currencies look a safer bet than local stocks and property.
Bankers’ lobby weighs Bitcoin threat
Regulators have woken up to the currency’s potentially huge impact on the global payments system, given the decentralized, virtual and anonymous nature of the peer-to-peer network.
China leads fresh regulatory response to Bitcoin bubble
Successive interventions by China’s central bank to rein in trading of Bitcoins in recent weeks have not only knocked the cryptocurrency hard but seemingly helped legitimize its existence.
Bitcoin: banks are beginning to believe the hype
The emergence of cryptocurrencies such as Bitcoin is beginning to pose a real threat to banks’ dominance of the multi-billion global payments business. Banks are still trying to figure out how best to respond. Some are a bit further ahead than others.
Year of the Bitcoin set to end on a low after China clampdown
The Bitcoin rollercoaster has lurched down as BTC China said it would no longer be accepting renminbi deposits, triggering a massive sell-off across most cryptocurrencies. But Bitcoin believers remain unbowed. Here is a round-up of the most bullish projections.
Meet Monetas, the latest in Bitcoin-inspired payment platforms
The genesis of cryptocurrencies has revolutionized the payments space, tearing down the technological boundaries of what is possible and creating a swath of new platforms to move money around faster and cheaper.
Taking a chance on Bitcoin
Banks are trying their best to avoid doing business with Bitcoin exchanges, but some hardy institutions are actively seeking them out.
Bitcoin infrastructure evolving to enable greater use for payments
Escrow services crop up but lack of mainstream financial intermediaries might be an obstacle to bitcoin’s evolution into a mainstream currency.
Banks remain disinterested or wary of Bitcoin but there is a growing acknowledgement that the digital currency’s popularity cannot be overlooked indefinitely, if a recent gathering of the faithful is anything to go by. From trade to settlement, Bitcoin offers plenty of opportunities – and threats – for banks.
Bitcoin: to use or to hoard, that is the question
Bitcoin faces an uphill battle to satisfy the conventional functions of money as a medium of exchange, store of value and a unit of account, participants say at a leading conference on the digital currency this week.
Explosion of digital currencies such as Bitcoin creates regulatory headache
Like it or not, electronic currencies are here to stay, challenging traditional payment channels. Euromoney surveys the contenders for digital dominion as security and regulatory challenges bite.
The success of electronic currencies such as Bitcoin has turned the worlds of currencies and payments systems upside down. The latest player to join this game is OpenCoin, which in April received seed capital from a consortium of venture capitalists, including Google Ventures. Rather than becoming merely another payments system, OpenCoin is looking to be a paradigm-changing payments system that disintermediates traditional bank platforms.
Transaction bankers should wake up to the competitive threat that is Bitcoin, which, in theory, offers a multitude of benefits for multinational companies. Nevertheless, an information deficit and regulatory concerns will continue to temper corporate adoption of the digital currency, analysts say.
From cloud technology to cashless payments, digital currencies to social media, mobile banking to FX robots... financial institutions worldwide are looking to lead technological advances while also trying to keep up with them. And as well as the cost of innovation, many organizations are finding much of their technology budgets focused on dealing with regulatory burdens. Here is the latest coverage from Euromoney.