The world’s virtual currency billionaires (at least they were)
Investors, gov’t talk intellectual property
THE creators of the famous Forbes rich list have made their first attempt to identify the wealthiest people in the virtual currency industry. Yet the list that was published on Wednesday, right after major drops in virtual currency prices, inadvertently also served as a reminder of the fleeting nature of that wealth.
While the list in Forbes magazine, which was assembled in recent weeks, identifies about 10 virtual currency billionaires, most of them were not billionaires by the time the feature went online on Wednesday morning. On Monday alone, the prices of many virtual currencies plummeted over 20 percent, before stabilising on Tuesday.
At the top of the list is Chris Larsen, a founder of the Ripple virtual currency. Larsen was briefly estimated to be wealthier than Facebook’s Mark Zuckerberg last month when Ripple’s price peaked, taking his net wealth to nearly $60 billion.
Since then, the price of Ripple’s digital token, XRP, has fallen more than 80 percent. Forbes put Larsen’s wealth around $8 billion, but the same holdings were worth less than $6 billion by Wednesday.
Larsen is followed on the Forbes list by Joseph Lubin, an early investor in the Ethereum virtual currency network; Changpeng Zhao, founder of the virtual currency exchange Binance; the brothers Tyler and Cameron Winklevoss, longtime bitcoin investors who are famous from their legal battles with Zuckerberg over Facebook; and Matthew Mellon, the banking heir who is now a major holder of XRP.
The list is a reminder of how the biggest gains in virtual currencies have been reaped by a small number of early adopters – despite the early promises that virtual currencies could democratise the financial system and spread wealth more evenly.
Nearly all of the people on the list either helped found virtual currencies or have been involved with them for years. Recent efforts to quantify the inequality among bitcoin holders have found that it is significantly higher than in even the most stratified coun- tries, which may sting many people who recently rushed into virtual currencies and are now sitting on losses.
For early virtual currency adopters like the people on the Forbes list, the recent price declines are not catastrophic. The price of bitcoin is still up 600 percent from a year ago, and up 70,000 percent from when the Winklevoss twins began buying in 2012.
Identifying the richest people in the secretive and paranoid virtual currency realm is far from easy; some of it is guesswork. Lubin, whom Forbes pegged as the secondwealthiest person in the virtual currency universe, illustrates the difficulties. He told the magazine that he had begun selling his Ethereum tokens, known as Ether, last year to fund his business, ConsenSys. Because Forbes could not verify his holdings, the magazine put his wealth between $1 billion and $5 billion before the most recent price declines.
The normal Forbes billionaires list is easier to compile because the richest people in the world generally have most of their wealth tied up in stock holdings, which usually have to be disclosed for big public companies. With virtual currencies, it is not necessary to disclose your identity, and the system was created by people who were interested in protecting financial privacy.
Many large holders of virtual currencies are loath to acknowledge their holdings for privacy and security reasons, and many people who are rumoured to have massive bitcoin stockpiles are not on the Forbes list.
Perhaps the most notable omission is Satoshi Nakamoto, the mysterious creator of bitcoin, whose identity has been guessed at many times but never confirmed. Researchers have guessed that Satoshi, as the creator is known, likely amassed about 1 million bitcoins during the network’s first year, when few other people were mining new tokens. Those bitcoins would now be worth around $7 billion.
Others have publicly claimed to have large holdings without verifying those holdings. Brock Pierce, a former child actor and the leader of a virtual currency community in Puerto Rico, has said he would donate $1 billion of his virtual currency fortune to charity, but Forbes said, “He refuses to provide documentation that proves he has anywhere near that much money.” The magazine estimated Pierce’s wealth between $700 million and $1 billion.
The list suggests that inventing virtual currencies can end up being less lucrative than investing in them. The magazine estimated that the inventor of Ethereum, Vitalik Buterin, is less wealthy than two early investors, Lubin and Anthony Di Iorio, who had previously managed his family’s patiodoor business in Canada.
And while three big holders of Ripple’s token, XRP, are on the list, the inventor of the digital token, Jed McCaleb, is not. FOREIGN business and political leaders cautioned yesterday that Cambodia could have difficulty attracting investors if it does not crack down on counterfeit goods, while one government official said authorities did not have the resources to properly regulate imports.
At an event hosted by the European Chamber of Commerce (Eurocham), several speakers, including EU Ambassador George Edgar, extolled the benefits of protecting intellectual property and called widespread counterfeiting a “worrying phenomenon”.
“Companies have worked hard to produce the intellectual property incorporated in their products, and they deserve to reap the benefits of their labour,” Edgar said.
Jean-Gaetan Guillemaud, vice chairman of the Eurocham Healthcare Committee, noted the importance of stopping counterfeit pharmaceuticals, which have negative economic effects and cause more than a million deaths globally each year.
“Health care in Cambodia is an $800 million industry, and 15 to 20 percent of pharmaceuticals are estimated to be counterfeits in many markets,” he said.
Soy Monica, senior external affairs manager for consumer goods giant Unilever (Cambodia), said that more than 50 percent of the company’s products were affected by counterfeiting, with a loss of $4 million to $5 million in Cambodia alone.
“This is a serious concern,” she said, noting that the prevalence of counterfeiting in Cambodia would likely affect other companies’ decision to invest in the Kingdom.
“We [at Unilever] have hosted some workshops [to explain to people how to spot counterfeits], but we really should do more checks at the border,” she said. “It’s too hard for many consumers to determine just from looking at the packaging.”
But Em Wutthy, the pharmaceuticals expert for the Ministry of Interior’s Cambodian Counter Counterfeit Committee (CCCC), said the government simply wasn’t able to inspect all goods being imported.
“Most of the customs [officials] don’t have enough staff to check the border checkpoints,” he said, adding that Cambodia could not be sure that its goods were inspected at the border.
“Customs should work on these border checkpoints … [and] it is important companies come to [the CCCC] and try to protect their own brand.”