Cryptocurrencies Surging in Africa as Alternatives to Traditional Banking

Africa is rarely considered to be one of the larger markets for cryptocurrencies, but with the right factors in place — such as an increasingly tech-savvy populous and inflation triggered by central banks — that might be set to change.

Case in point: The surge in popularity of cryptocurrencies has contributed to the opening of at least 15 new trading venues in South Africa within the past year alone. And peer-to-peer marketplaces also recorded a surge in trading volumes as Bitcoin’s price reached historic highs at the end of last year.

Global wallet and exchange Luno reported 2000 BTC worth of transactions in November 2017, when the coin’s price was hovering in the $10,000 range, and approximately 37% of those transactions occurred in South Africa. Luno began operations in 2013 and boasts 1.5 million users spread across 40 countries — including Indonesia, Malaysia, Nigeria, South Africa, and the U.K. The company has big plans: By 2025, it plans to reach 1 billion customers. To put that in context, North America’s largest cryptocurrency exchange, Coinbase, had 11.7 million users last year. 

The South African government is also making moves. The country’s central bank has launched a program that will trial JPMorgan’s Quorum blockchain in interbank clearing and settlement. According to an official statement dated February 13th, the South African Reserve Bank (SARB) revealed it has established a fintech program that will prioritize, among other things, a project dubbed Khokha to explore a proof-of-concept (PoC) using the tech.

Why is Africa Becoming Such a Big Market?

First, conditions in the continent are conducive to the adoption of cryptocurrencies — with many countries in the continent such as Zimbabwe, South Sudan, and Nigeria, suffering from rampant inflation. What makes cryptocurrencies so appealing is their decentralized method of operation, permitting them to become alternatives to fiat currencies that have been de-railed thanks to disastrous central banking policies.

Second, the increasing use of mobiles and other computing technology within the continent has helped its population become comfortable with cryptocurrency technology. New businesses that use blockchain are emerging all the time: Kenya-based BitPesa, for example, is a payment platform and money transfer service that works with 60 banks around Africa and has seven mobile wallets on its platform.

Third, the threat of government regulation, which has roiled cryptocurrency markets recently, is (presently) fairly low in Africa. While governments and agencies have warned about the dangers of investing in cryptocurrencies, regulators in African countries have taken a hands-off approach to trading at exchanges.  

But Africa is susceptible to the same pressures as cryptocurrency markets in other parts of the globe: Cryptocurrency traders in Africa were paying a premium of as much as 40% in 2017. According to reports, the premium occurred due to a shortage of liquidity, meaning sellers were able to command unrealistically high prices due to high demand from buyers.

Outside the continent, other countries are also looking to cryptocurrencies to help solve their financial woes. Earlier this year Venezuela, which has been crushed by quadruple-digit inflation, announced plans to develop its own token, the Petro, in attempts to turn things around.

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According to Business Insider, Ari Paul, the chief information officer and co-founder of cryptocurrency hedge fund Blocktower, has purchased $1 million worth of options that offers a 30-fold payout if the bitcoin price hits $50,000 by the end of 2018, on behalf of Blocktower.

“On Wednesday, an unidentified entity made a $1 million bet on bitcoin trading above $50,000 by next December. The cryptocurrency hedge fund BlockTower Capital was behind the bet, people familiar with the matter told Business Insider.”

Blocktower’s $1 Million Bet

Immediately after the initial report on the $1 million bet placed on LedgerX by the Wall Street Journal, Paul tweeted:

At the time, prior to the disclosure of the investors behind the call, LedgerX CEO Paul Chou hinted that an institution has made the call, not an individual.

“Without a doubt, there are institutions out there that are looking at these types of trades or have done these types of trades. It’s not an individual, let’s put it that way.”

In an interview with CNBC’s Fast Money, Paul explained that the option contracts Blocktower has purchased expire if the price of bitcoin fails to reach $50,000 by the end of 2018. But, if it does, it pays out the firm on a 30 to 1 odds. Hence, a $1 million bet on the LedgerX options platform on the price of bitcoin achieving $50,000 would generate Blocktower a $29 million in profit.

The option contracts Blocktower purchased expire by the end of 2018, but are available for cash in anytime throughout the year. If the price of bitcoin surpasses $50,000 earlier than December, the contracts can be cashed in.

“This call costs $3,600. If bitcoin settles anywhere below $50,000 next year, it will expire worthless. But if bitcoin goes to $100,000, it pays 30 to 1 [30-fold]. Bitcoin is volatile. This is a hyper volatile asset. Bitcoin is up more than 1,400 percent this year. It also falls 30 percent almost every other month. These calls are a bet that if its volatile to the upside we can easily see over $50,000 next year,” Paul explained.

Why are Investors so Optimistic?

If the price of bitcoin reaches $50,000, it would place its market valuation at over $1 trillion. Given that the market cap of gold is at around $8 trillion, it would elevate bitcoin to an optimal position to challenge gold to evolve into the world’s premier store of value and currency.

Investors are highly optimistic in the price trend of bitcoin because of the exponential increase in its adoption. In 2017 alone, some of the global market’s largest financial institutions including the New York Stock Exchange (NYSE), Chicago Board Options Exchange (Cboe), Nasdaq, Cantor Fitzgerald, Goldman Sachs, and JPMorgan have publicly expressed their support for bitcoin.

Governments of leading bitcoin markets such as Japan, the US, and South Korea have implemented practical regulations to facilitate the growth of bitcoin businesses, instead of restricting it.

Until the end of 2017, the price of bitcoin has been able to reach $15,000 without the entrance of institutional investors. With tens of billions of dollars in institutional money expected to flow into the bitcoin market, investors have become extremely confident in the growth trend of bitcoin in the long-term.

On CNBC’s Rundown, respected researcher, and financial analyst Ronnie Moas from Standpoint Research stated that in the long-term, the bitcoin price will likely reach $400,000.

“Bitcoin is already up 500 percent since I recommended it in the beginning of July, and I’m looking for another 500 percent move from here. The end-game on bitcoin is that it will hit $300,000 to $400,000 in my opinion, and it will be the most valuable currency in the world,” said Moas.

In July, Moas predicted the price of bitcoin to surpass the $5,000 mark by the end of 2017, when bitcoin was trading at below $2,600. As of December 18, the price of bitcoin remains above $19,000 and its market cap has surpassed $317 billion.

$400,000 Long-Term Target

Essentially, a $400,000 long-term price target of bitcoin would require the market valuation of the cryptocurrency to achieve exactly $8.4 trillion, a market cap that is larger than that of gold.

In 2013, Thompson Reuters GFMS revealed in a report that there exists 171,300 tons of gold in supply. That estimate placed the valuation of the gold market at $7 trillion. For the price of bitcoin to surpass $400,000, its market cap will have to surpass that of the gold market.

Previously, NewsBTC reported that JPMorgan global markets strategist Nikolaos Panigirtzoglou explained the potential of bitcoin penetrating into the gold market and establishing itself as the premier store of value through a drastic increase in liquidity and adoption.

Panigirtzoglou stated that the launch of bitcoin futures contracts and integration of the cryptocurrency by major financial institutions would allow bitcoin to compete against traditional asset classes such as gold. He stated:

“In all, the prospective introduction of bitcoin futures has the potential to elevate cryptocurrencies to an emerging asset class. The value of this new asset class is a function of the breadth of its acceptance as a store of wealth and as a means of payment and simply judging by other stores of wealth such as gold, cryptocurrencies have the potential to grow further from here.”

Bitcoin Already Penetrating Into Offshore Banking Market

As many analysts including Blocktower co-founder Ari Paul noted, bitcoin is already penetrating into the offshore banking market at a rapid pace, an industry which major banks such as JPMorgan and Goldman Sachs dominate.

The offshore banking market is estimated to be worth over $40 trillion, with the majority of holdings and wealth of large-scale investors and traders stored overseas. Paul emphasized that as a robust and decentralized store of value, Bitcoin is capable of serving the offshore banking market in orders of magnitude better than centralized financial institutions, as it provides financial freedom, privacy, and independence.

Over the next few years, if bitcoin can sustain its current growth rate as a store of value and a currency, the market cap of the cryptocurrency will likely enter the trillion dollar region.

In April, ShapeShift CEO Erik Voorhees, who has always been extremely optimistic in regards to the mid to long-term growth trend of the cryptocurrency market, explained that he would be satisfied if the cryptocurrency market cap surpasses $300 billion by 2021.

The bitcoin market cap has surpassed the $300 billion cryptocurrency market cap prediction by Voorhees, and the market valuation of all of the cryptocurrencies in the market combined has surpassed $587 billion.

Less than a month since CEO Jamie Dimon inaccurately described bitcoin as a “fraud,” JPMorgan has changed its stance on the cryptocurrency.

Throughout the past month, analysts and investors in both the cryptocurrency and traditional finance markets have criticized Dimon and JPMorgan for their baseless condemnation on bitcoin. Almost immediately after the company’s CEO called bitcoin a fraud and a bubble, JPMorgan was fined $4 billion for actual fraud in September.

After that, Dimon broke his personal promise to not discuss bitcoin any longer by describing it as a money laundering tool. Ironically, JPMorgan was cracked down by the Swiss financial authority FINMA, for money laundering.

JPMorgan Changes Stance, Suddenly Optimistic in Regards to Bitcoin

Earlier this week, JP Morgan analyst Nikolaos Panigirtzoglou, publicly stated that bitcoin has the potential to become an emerging asset class, given that CBOE and CME, two of the world’s largest options exchanges, will list bitcoin futures by mid-December.

“The prospective launch of bitcoin futures contracts by established exchanges, in particular, has the potential to add legitimacy and thus increase the appeal of the cryptocurrency market to both retail and institutional investors,” said Panigirtzoglou.

He further emphasized that as the acceptance of bitcoin as a store of value continues to increase, the market valuation and price of bitcoin will likely increase proportionally.

Bitcoin Futures Exchanges Will Lead Investors in Finance Market to Bitcoin

This week, several highly respected analysts including Satoshi Citadel Industries (SCI) co-founder Miguel Cuneta explained that bitcoin is only starting to transform the finance sector, and the price of bitcoin, which is currently at around $11,500, will increase exponentially in the upcoming years.

“Over one-third of a trillion dollars. That’s the total amount of cryptocurrencies in the world. $165 Billion belongs to Bitcoin alone, which just shows how dominant network effects can be. Because of Bitcoin technology, the power to create money was granted to every human being on earth and taken away from kings, oligarchs, and governments,” said Cuneta.

In the long-term, more investment banks, hedge funds, and investors will change their stance on bitcoin.

Earlier this week, Paul Vigna, a Wall Street Journal reporter, revealed that several key figures familiar with the matter confirmed that Goldman Sachs, the $93 billion investment bank, may launch a bitcoin and cryptocurrency trading platform in the upcoming months.

Goldman Sachs’ cryptocurrency trading division and strategic investment group are reportedly investigating into the plan of launching a cryptocurrency trading platform to provide sufficient liquidity towards institutional and retail traders. While sources close to the project told Vigna that it may not proceed, if Goldman Sachs pursues the launch of a cryptocurrency trading platform, it would be the first instance wherein a regulated mainstream bank would launch a cryptocurrency exchange for general traders and investors.

The motive of Goldman Sachs behind its plan to operate a trading platform for bitcoin and cryptocurrencies remains unclear. But, analysts speculate that it is likely due to the bank’s poor performance and decreasing revenue. Last year, according to the WSJ, revenue in its fixed-income division dropped by 21 percent, as most commodities and currencies declined in value. The launch of a new venture in cryptocurrency trading could spur the demand toward Goldman Sachs, in both the traditional finance industry and cryptocurrency sector.

Cryptocurrencies exchanges and trading platforms have evolved significantly since 2016. Coinbase, the world’s most widely utilized bitcoin wallet and cryptocurrency trading platform raised $100 million at a $1.6 billion valuation. Regional exchanges such as Korbit were also required at a valuation of hundreds of millions of dollars. Other global exchanges including Bittrex, Bitfinex, and Bithumb are also likely valued at over a billion dollars, in consideration of their trading volumes and user base.

Hence, while the cryptocurrency exchnage market could seem like a minor industry for Goldman Sachs to target, if the bank could penetrate the market through acquisitions, it would be possible for Goldman Sachs to operate a multi-billion dollar cryptocurrency trading platform within the US.

“Goldman’s effort involves both its currency-trading division and the bank’s strategic investment group, the people said. That suggests the firm believes bitcoin’s future is more as a payment method rather than a store of value, like gold,” wrote Vigna.

To the WSJ, a Goldman Sachs representative further emphasized that the financial institution is actively investigating various ventures to address the growing demand toward cryptocurrencies and bitcoin.

“In response to client interest in digital currencies we are exploring how best to serve them in this space,” the spokeswoman said.

Goldman Sachs is taking a fundamentally different approach to JPMorgan. It is beginning to acknowledge the shift in trend from traditional banking systems to cryptocurrencies, which are more efficient, secure, and cheap, due to their peer-to-peer nature. JPMorgan and its CEO Jamie Dimon have been completely dismissive of bitcoin, despite the criticism from experts and investors including prominent venture capitalist Chamath Palihapitiya and Goldman Sachs CEO Lloyd Blankfein.

Earlier this week, the Managing Director of the International Monetary Fund Christine Lagarde, stated at the Bank of England conference that bitcoin and cryptocurrencies are likely to replace banks and existing financial service providers in the future.

“For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked. But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies,” read the paper of Lagarde.

It is only logical for banks such as Goldman Sachs to be at the forefront of technological and financial disruption triggered by the emergence of bitcoin and cryptocurrencies, rather than positioning themselves on the sidelines.

Speaking at an investor conference in New York on Tuesday, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon blasted Bitcoin in a series on damning statements. Calling the cryptocurrency a “fraud” that’s “worse than tulip bulbs”, he went on to say he’d fire any employee trading Bitcoin “in a second”. He gave the following concise reasons: “It’s against our rules” and “they’re stupid”. He concluded that both cases were “dangerous” to his bottom line.

When Dimon refers to tulips, he means the market crash that affected the horticulturists of Holland in the seventeenth century. Speculators drove the prices of tulip bulbs to astronomic levels, some scholars claim as much as ten times an annual skilled worker’s salary for a single bulb. The “bubble” eventually burst, largely due to the hugely dubious nature of trades occurring on the ramshackle effort at a futures market that had sprung up around the industry. The spectacular crash in the price of tulip bulbs in 1637 that followed is often cited as the history’s first economic bubble. It’s also trotted out by just about every vocal anti-crypto-type going.

However, Dimon had more for Bitcoin than just vague language (“fraud”?), and talk of inflated tulip bulbs. He went on to highlight his doubts about future regulatory measures against cryptocurrency. He spoke of concerns regarding the lack of state control over the asset and warns of government intervention. “Someone’s going to get killed and then the government’s going to come down.” He has cited the recent clampdown in China as evidence to back up his claims, concluding “governments like to control their money supply.”

Expressing sentiments that seem straight from 2015, the chief executive dismissed the huge legitimate economy that has emerged around Bitcoin since its early shadowy past:

“If you were a drug dealer, a murderer, stuff like that, you are better off doing it in Bitcoin than U.S dollars. So, there may be a market for that, but it’d be a limited market.”

Such a stance might come as a surprise to those familiar with the Enterprise Ethereum Alliance. The JPMorgan logo has been proudly displayed amongst the rest of the “who’s who” of global corporations making up the much-lauded group. However, Dimon did comment on blockchain technology more generally too. He confirmed that there will still be great use cases for the protocol, particularly in the banking sector but it “won’t be overnight”.

All that said, Dimon, did finish by saying that his “daughter” had purchased some Bitcoin…

Ref: Business Insider | Bloomberg | Image: Alexas_Fotos (License CC0)

Things are going from bad to worse for the R3 consortium. Ever since it became clear the group is not focusing on blockchain technology, there has been a lot of backlash. JPMorgan Chase & Co has now decided to leave the group and focus on other things. It appears R3’s fundraising process is the main reason for this departure.

While there are still plenty of banks supporting R3, the group is losing some critical support. JPMorgan & Chase is not too happy with the idea of raising US$150m from members. This money is needed to further develop the development of R3 products. However, a lot of financial institutions joined because they want to get involved in blockchain technology. The consortium is not focusing its attention on this technology by any means, which causes some friction.

Another Big Blow For The R3 Consortium

JPMorgan & Chase parted ways to pursue a “distinct technology path”. This particular venture is at odds with how the R3 group is handling things right now. This seems to indicate the major bank wants to pursue blockchain technology on their own accord.  However, the bank’s staffers have not commented on the situation thus far,  which leaves a lot of room for speculation. One thing is certain, the bank cut all ties with the consortium.

It is not the first time a major bank exits the R3 group, though. Goldman Sachs, Santander, Morgan Stanley, and National Australian Bank also exited the non-blockchain oriented group a while ago. At first, these departures seemingly revolved around the fundraising process as well.

However, it still remains to be seen whether or not that is the whole story. Banks are keen on working with the blockchain after all. R3 aims to raise money for products not using this technology, thus departures are to be expected. All of the banks leaving the group continue to pursue blockchain ventures on their own accord, though.

For the time being, it remains unclear what will happen with the R3 group. Their initiatives are not gaining any significant traction so far. Despite over 80 banks still making up the consortium, it may only be a matter of time until more major banks leave the group. Blockchain technology remains of great interest to financial institutions. Anyone not working on this technology will be left behind sooner or later.

Header image courtesy of Shutterstock

The banking and financial institutions across the world have been working on development and implementation of blockchain technology based applications into their operations. The latest news about a successful trial run of a similar blockchain technology based solution comes from AXONI.

In a recent press release, AXONI, a distributed ledger based financial technology solutions provider has reported that the company along with 6 other financial services providers has successfully tested the implementation of a blockchain technology and smart contracts based solutions. This blockchain based smart contracts solution is designed specifically to manage and address the post-trade lifecycle events associated with the standard North American single name Credit Default Swaps or CDS.

AXONI has conducted the trial with the likes of the Bank of America Merrill Lynch, Credit Suisse, Citi Group, The Depository Trust and Clearing Corporation (DTCC), JP Morgan and Markit. The trial clearly demonstrated the capability of blockchain technology when it comes to handling various complex processes associated with CDS. By using AXONI’s solution, they were able to manage amendments, compressions, novation’s and payments flawlessly over the distributed blockchain network.

This is neither the first nor the last of such trials to be conducted by different fintech companies as they try to integrate Bitcoin’s underlying technology into their operations. While each deployment varies depending upon the specific requirements of a particular company, group or sector, they all work based on the same fundamental principles as cryptocurrency’s distributed ledgers. The Credit Default Swap segment was considered for the trial due the abundance of pre-existing data and the well-established benchmarks, courtesy of the Depository Trust & Clearing Corporation’s Trade Information Warehouse.

In order to begin the test, the CDS trade confirmation data was first entered onto the blockchain. The data was stored on the blockchain in the form of smart contracts capable of automatically processing the instruments as required. The information available on the blockchain can be accessed in real time by anyone with the required privileges. This will make the process of communication with clients and regulators much easier for the financial institutions.

In addition to automation and efficiency, the use of blockchain technology will also ensure the integrity of data with enhanced privacy and security. Any information once stored on a blockchain is irrefutable and timestamped, making it easier to go back to the files at any point of time to verify the transaction details and other associated information from anywhere.

The press release also states that the technology presented by AXONI passed a total of 85 different tests with flying colors. With all the trials cleared, AXONI’s blockchain based solution may soon see the light of the day with the financial powerhouses integrating it onto their live platforms.

While AXONI has been conducting successful tests on one side, another heavyweight in the sector, R3CEV recently announced its latest breakthrough. The company as part of the banking conglomerate comprising of over 40 different international banks launched Corda, a distributed financial ledger for the banking sector.

With this breakthrough, AXONI has now become one of the proficient companies that can easily assess the requirement and deploy the right solution in less than a year.

Ref: AXONI (image), Source: Press Release

The full potential of Bitcoin’s intrinsic technology – blockchain – had until recently gone largely unrecognized by the entire financial technology industry as well as the established banking giants of North America, the Far East, and Britain for many years.  That was until some of the more avant-garde  -among the usually wood-paneled, traditional institutions  looking to back the ‘next big thing’ – began coming up with gigantic sums of venture capital. This move focused the attention of everyone one Bitcoin’s role in the mainstream.

The giant investments in Bitcoin startups – with no proven track record and engaged in the development of peer-to-peer currency not backed by any central entity whatsoever – was gigantic. In some cases, the term record-breaking became applicable, as in the case of 21Inc, who raised $116 million in funding.

Why the progression from black sheep to massive fintech investment?

The reason for the large investments in Bitcoin technology – and ONLY technology – last year was not because venture capital funds and fintech advocates viewed Bitcoin as a viable currency for the mainstream, but came down to the inseparable Blockchain technology.  The blockchain is a transaction database shared by all nodes that participate in a system based on the Bitcoin protocol.

Hot on the heels of the interest showed by investors in providing Bitcoin technology developers with enough funding to further the cause of Blockchain, came the notion how the blockchain could be used by mainstream financial institutions in many areas of operation.  Examples range from remittances to securities exchanges – and importantly – the full automation of such processes.

Goldman Sachs, Barclays, JPMorgan and UBS are on the Blockchain wagon for 2016

To some people, 2015 was the year of vast investments intending to fan the flames of Blockchain development, and a year in which Bitcoin moved away from its radical, anarchistic roots from which bow-tie-toting mavericks self-styled their approaches toward going firmly up against the traditional financial system and centrally issued currency. That being said, 2016 will be the year in which banks could well adopt Blockchain technology on a wholesale basis, making Bitcoin an integral part of banking operations by default.

Similarly, if 2015 was the year of the establishment of prominent, government-regulated Bitcoin exchanges and infrastructure, 2016 will see this dynamic head into Wall Street, the Square Mile, and Canary Wharf.

In the summer of 2015, Bitcoin exchange CEO Jaron Lukasiewicz – whose Coinsetter Bitcoin exchange in New York was one of the world’s first regulated virtual currency venues –  explained to FinanceFeeds CEO Andrew Saks-McLeod that he could certainly see Blockchain technology heading into banks for the full automation of ledger and similar operational procedures.

He was, indeed, correct, as four giants including Goldman Sachs, UBS, JPMorgan and Barclays, are now adopting the technology for these purposes. These banks are very much au fait with the necessity of furthering their technology as they represent banks that handle the vast majority of interbank FX order flow globally.

UBS has been the most open about its plans to further Blockchain adoption. The company has assembled a team called ‘Crypto 2.0’ which conducts research on the technology from the firm’s head offices in London, and has so far explored more than 20 potential uses of Blockchain in its operations and is currently incubating the best ideas.

In keeping with the Swiss company’s investment banking roots and its fintech/electronic trading ethos, UBS has, among many other experiments, conducted a research exercise that developed ‘smart contracts’ that eventually became ‘smart bonds.’

Pre and post trade settlement companies becoming dinosaurs?

In this case, Blockchain is used to recreate the issuance of a bond, calculate interest, generate coupon payments and handle the maturation process, all fully automatically.

UBS has stated that there would be no need for pre- and post-trade settlement companies or intermediary firms because the software on the Blockchain has been designed specifically to automate the flow of information and funds between issue and buyer.

During this test, the system created a virtual coin called Bondcoin. This, in turn, facilitated the transfer of value between two parties, using the Bondcoin being linked to real fiat currencies and then connected to a central bank account.

Deutsche Bank’s research has been kept a bit closer to the firm’s metaphorical chest. However, the company has been investigating the idea of operating an innovation lab to investigate how Blockchain can be developed into a mainstay of the firm’s operations.

The company has stated that the adoption of Blockchain would be potentially problematic regarding regulatory and legal rulings but does understand that such technology could prove very disruptive to banks and move the entire efficiency forward.

Deutsche Bank does not see it as something limited to banking, however. A representative stated that Uber, AirBnB, and certain other fintech startups would potentially be under threat from such developments of Blockchain because they are effectively intermediaries using the payment systems within banks.

JPMorgan, while maintaining a degree of silence about the extent of its research on Blockchain technology, has committed $9 billion to technology investment in 2015, with a large focus on Blockchain.

Goldman Sachs views Blockchain as a way of ‘removing the middle man’ and sees it as something that could be applied to voting systems, vehicle registrations, wire fees, gun checks, trade settlements and cataloguing ownership of artworks.

The question is, if this technology becomes a real mainstay, and the banks begin building their topography on it, it may well move into the non-bank institutional FX world also, which begs the question as to where organizations that provide post-trade settlement and risk management such as FIX Trading Community, ICAP’s Traiana and CLS would be left.

Since the beginning of 2015, an increasing number of central banks and government agencies have begun to show interest in bitcoin and digital currencies. Investment Strategist Philipp Vordran believes that countries are considering turning their currencies into crypto-currencies.

“Countries are thinking about turning their currencies into crypto-currencies. I don’t know if that’s a smart idea. Once customers are used to them they might think about using independent currencies like Bitcoin instead of currencies issued by central banks,” said Vordran.

Several central banks including the Bank of England have considered the integration of digital currencies including bitcoin and other custom-built altcoins to replace fiat and reduce the circulation of fiat money in their economies.

Furthermore, with the emergence of publicly tradable bitcoin funds such as Bitcoin Investment Trust, the number of investors purchasing bitcoin as a long-term asset and as a currency has significantly increased over the past few months.

Due to the popularity of bitcoin, blockchain and digital currency-focused startups are beginning to explore potential implications of Bitcoin as a currency and as a technological protocol.

“In many areas of life, [blockchain is useful] when it comes to documentation of contracts and actions. From real estate transactions, through insurance contracts, payments or financial statements on the capital market. For months, many companies set up working groups to consider how they can be active in this new environment, so that the technology is not snatched from them by newcomers. Even national banks are already thinking to make to cryptocurrency its respective currency,” added Vordran.

However, leading banks including JPMorgan are still sceptical and are against the idea of using a decentralized payment protocol as a reserve currency. Established financial institutions fail to understand and embrace the decentralized and transparent nature of the blockchain technology.

“Bitcoin is like 2 billion dollars or 3 billion dollars. We (JP Morgan) move 6 trillion, a day. So you’ve got to (put it in perspective). It’s not going to happen. It’s a waste of time. There will be no real non-controlled currency in the world. The technology may even be used to transport currency, (but) it will be for U.S. dollars,” said JPMorgan CEO James Dimon.