LONDON – The Internet currency Bitcoin is surrounded by uncertainty. Is it a speculative bubble? Is it really as anonymous as its proponents claim? Can one actually use it to purchase the legendary White Widow strain of marijuana, or to hire a hit man?
These are certainly interesting questions, but they are diverting attention from far more important discussions about Bitcoin’s potential to drive financial-sector innovation.
Bitcoin is so innovative, in fact, that beyond breaking the conventions of currency, it has even transcended partisan ideologies. Indeed, the Nobel laureate economist Paul Krugman and US Tea Party icon Ron Paul are diametrically opposed on virtually every issue but Bitcoin (both deeply dislike it).
And yet Bitcoin’s opponents should be asking how the groundbreaking ideas that underlie it could be applied to reforming the global financial system. Although the 2008 financial crisis exposed profound institutional shortcomings, the response – including heightened regulatory safeguards like the 2010 Dodd-Frank Act in the United States and the Basel III banking standards – has failed to bring about the needed transformation. Likewise, protest movements like Occupy Wall Street, aimed at raising awareness of – and ultimately reforming – the culture of finance, have delivered mixed results.