Crypto currencies like bitcoins are gaining traction, but how these innovations in fin tech disturb the existing elitism and the desire to maintain the regulatory status quo regionally and internationally through the current structures of the law and compliance. Are the new crypto currencies merely a repetition of the old barter economy and we are talking about new beaver pelts or cowrie shells. Fintech generally will change the basis of competition in financial services, but have not yet shifted the power to the people. I am reminded about stewardship and agency theory and the role of banks in maintaining that they are better at managing money than their customers. That remains to be seen, Digitisation has democratised some financial transactions, the emergence of bitcoins and block chains appears to eliminate banks and other intermediaries and regulation is now by crowd rather than by statute.
People have been forecasting the demise of money for a long time or even return to a moneyless state as enjoyed by the Incas or as supposed to be under Communism. According to Niall Ferguson Money has to be affordable, durable, fungible, portable and reliable, with it he may have added it also has to comply with the prevailing infrastructures, rules and regulations in the region/society in which it operates . This, then, is at the heart of the Bitcoin revolution and whether these new currencies and media of exchange can ‘disrupt’ or at least replace the traditional ways we have done business for centuries. It is interesting to note that we still hold value in ledgers and accounting so traceability appears to also rear its head in this discussion cue DLT. I am reminded of a play when I ask the question. ‘So whose money is it anyway? as the appeal of blockchain is to cut out the middleman, however that again remains to be seen, especially when we have speculators entering the fray. When we see the applications of Blockchain technology to other areas of commerce the idea of data as a currency comes into being. It then becomes sector/product specific and perhaps has gone full circle back to specific items being traded so perhaps it loses some of the fungibility.
So how do we measure a Bitcoin’s worth?
Bitcoins are intangible-, they do not exist physically, is not a ‘legal tender’ and itself has changes in value. It is not a FIAT currency because the holder does not have a right to convert to cash or another financial asset. Bitcoins could be classed as a ‘stock’ item in a corporate balance sheet if they were regularly trading for that business. If they were ‘mined’ by the business itself then the cost of extraction would also be relevant. The accountancy profession is also looking at intangible value and how this is counted and with reference to Accounting standards we now enter into the realms of ‘fair’ value- itself difficult in a rapidly changing and roller coster market and taking hits through the profit and loss account.
When we talk about consumer confidence we are essentially looking at regulation and market stability, areas which are in it’s infancy in the Bitcoin story.
These crypto currencies exist in a new Wild West where there are many Cowboys and Snake oil salesmen. We will have to wait awhile before the law comes to town and settles down the inhabitants of Dodge City.