A bias against Bitcoin?
A statement from the European Banking Authority is warning people about the risks of using Bitcoin for payment and investment/speculation.
The press notes that the EBA paper stops short of telling people not to use the digital currency.
Many of the points made in the warning appear to be well founded on the facts: however, exactly the same points could be made about everything from gift vouchers to bullion. It is not clear why Bitcoin should be singled out for special attention like this.
Yes, gold and silver bullion are not issued by any central authority. Bullion values rise and fall many times in each day. When bullion values dipped earlier in 2013, some short term speculators sold at a loss: but for every scared seller, there was also somebody else willing to buy. Has anybody seen any stories of disgruntled investors throwing their gold out with the rubbish when the market moved?
A more interesting example is that of the gift vouchers offered by many chains of retail stores. With many stores going through restructuring and liquidation in recent years, customers holding the vouchers have been left high and dry. Unlike temporary dips in bullion or Bitcoin values, the vouchers have often become truly worthless. The story has been repeated again and again around the world, including HMV in the UK and Mothercare in Australia.
When retailers enter bankruptcy, it is usually at the instigation of a single person such as a prominent shareholder or the lender. Bitcoin and bullion, on the other hand, are arguably much harder for any single person or small group to pull the plug on so dramatically. Their value depends on their widespread acceptance around the globe rather than any single point of failure.
I'm yet to see any evidence that Bitcoin is a long term store of value. Even the most knowledgeable proponents of Bitcoin agree that it is not technically perfect, due to the lack of true anonymity. When a truly anonymous solution is found, it will be interesting to see if the industry migrates away from Bitcoin.
On the other hand, the threat of a truly anonymous community cryptocurrency is a scary thing for governments in the surveillance age. It could be argued that governments may become active players in the Bitcoin market in order to keep more anonymous solutions from gaining market share. For example, if a government was to accept remittence of taxes by Bitcoin or if smaller countries were to use Bitcoin to facilitate foreign exchange (bypassing the use of US dollars) this would make the currency far more credible for other mainstream purposes.