Acceptance and volatility – are they related?

Governments and institutions around the world are increasingly paying attention to cryptocurrencies (CC) and the technology that supports them all – Blockchain. Some of the attention is negative, but increasingly, it is clear that more and more attention is positive, supportive and exploitative. As the business and investment world becomes increasingly aware that it has a disruptive force in its midst, it becomes imperative to examine business processes in this new frontier and compare them to the relatively old, slow and expensive processes they have now. New technologies need new investment capital to grow, and with such growth come hiccups, false starts and controversies.

Developments in the CC and Blockchain world are coming fast and furious as governments and institutions make efforts to harness the technology, tax all profits, protect their investments and protect their constituents and customers – a complex balance that goes a long way to explaining why many seem to in different directions and often change directions. Here are some recent developments that serve to illustrate that CC and Blockchain are gradually being accepted into the mainstream, but still struggle with regulation, control and stability:

  • Uzbekistan will announce its plans to regulate Bitcoin in September 2018, and a Blockchain “skills center” is set to start operating in July.
  • Kazakhstan has signaled its desire to copy Singapore’s blockchain permissiveness.
  • Belarus has announced that it wants to create a welcoming environment for Blockchain, as an innovative financial transaction technology.
  • Venezuela created “PETRO”, a CC created to raise cash as Venezuela approaches economic collapse. The hope is that it will be a way to circumvent sanctions that prevent Venezuela from raising money on the global bond market. President Nicolas Maduro claims that PETRO raised $735 million on its first day, a claim that has not been substantiated. Maduro sees PETRO as “the perfect kryptonite to defeat SUPERMAN” – his analogy to US-imposed sanctions, thinking that this currency frees his country from the grip of banks and governments. Maybe he doesn’t see that PETRO was started by the government – his.
  • TD Canada Trust has become the first Canadian bank to join some UK and US banks in banning the use of credit cards for CC purchases.
  • South Korea is moving towards legalizing Bitcoin, indicating that it will consider Bitcoin as a liquid asset. Since South Korea is at the forefront of the CC market, the impact of their decisions will be significant and global. Japan has already taken those steps, making bitcoin trading more transparent, regulated and 100% legal.
  • BlackRock, the world’s largest investment firm, continues its bullish outlook for CC, saying it sees “broader use” in the future.
  • Romeo Lacher, chairman of the Swiss stock exchange, believes there are many advantages to releasing a crypto version of the Swiss franc, and his organization would be supportive, adding that he “doesn’t like cash”.
  • China’s largest online retailer and retailer has announced the first four startups for its Al Catapult Blockchain Incubation Program. The Beijing-based program, which has received applicants from as far away as Australia and the UK, aims to leverage the company’s vast Chinese infrastructure to develop new blockchain and artificial intelligence applications.

With all the global activity going back and forth, it’s clear that Blockchain is the disruptive technology of this era, and CCs are just one aspect of the possibilities enabled. Just like the Internet investment explosion of the 90s, Blockchain and CC investments will have winners and losers, however, we do not want this to turn into the huge bubble that destructively burst with many early DOT COM investments in the 90s. What we want to see is a well-reasoned approach to Blockchain development and investment.

Volatility will continue to be the norm in this market space for some time to come as we see increasing adoption, innovation and regulation. Failures will happen and successes will emerge, forcing governments, institutions, investors and innovators to constantly adapt their processes and their thinking. Volatility is normal and healthy at this stage.