Bitcoin is drifting towards mainstream

Bitcoin was born nine years ago as an anarchic project — a digital currency detached from any central bank. It promised a revolutionary alternative to the existing international payments system, where a central administrator was replaced by a multitude of decentralised digital verification points. But the future of bitcoin and the technology it uses, blockchain, are drifting towards the mainstream. Regulators have their sights set on bitcoin and other crypto assets it inspired. More than 75 of the world’s biggest banks are turning to blockchain to fight the threat of new payments rivals.

The regulatory attention became inevitable after bitcoin’s wild swings in value, which at its peak was yo-yoing by as much as 20% in a day but has slumped from $19,000 in December 2017 to about $6,500 now. Bitcoin was followed by other types of cryptocurrency, the creation of exchanges, brokers and providers of wallets, or apps for holding and transacting in cryptocurrencies. There has been alarm over security breaches and the potential use of such networks for money-laundering and terrorist financing activities.

A UK parliamentary committee called the cryptocurrency space a “wild west” last week and urged regulation. The New York attorney-general’s office published a report in September denouncing “pervasive” conflicts of interest at many cryptocurrency exchanges and lack of sufficient measures to prevent market manipulation. The EU has included cryptocurrency exchanges and wallets in the fifth iteration of its antimoney-laundering directive, due to come into force in 2019.

This is a highly complex market. Regulators are still working out how to police it. But as crypto assets and technology move into broader use by growing numbers of people around the world, a co-ordinated and appropriate regulatory framework is needed. The future of the crypto world may be greater technical and regulatory integration with mainstream finance. London, September 25