How Scotland could become a Bitcoin pioneer
Everywhere I turn these days the chat is all cryptocurrency, Bitcoin, digital wallets and decentralised finance or Defi. What used to be the realm of techies or nerds or even anarchists is now becoming more mainstream and normal.
Fresh money is pouring into cryptocurrency as big institutions mull over its advocacy as a hedge against inflation. Paul Tudor Jones, a Wall Street Goliath, has stated that he has up to 2 per cent of his portfolio in Bitcoin. This is turning heads on the other side of the Atlantic. But, there is a bigger picture emerging on specifically Bitcoin. What happens when a government or country buys in?
About ten years ago, Bitcoin started as a currency case that individuals could use outwith banks. The global financial crisis was in full swing and many people had lost faith in the state and banks. Bitcoin was the antidote to traditional banking which needed bailed out on each boom and bust cycle. It was an asset that Greece and Cyprus could not remove from customers’ banks accounts. It was outside the power of the state to control. Hence why it was demonised. It was dark. It was sinister and a threat to order. But, roll on ten years and that picture has changed dramatically.
Bitcoin is freely traded on multiple exchanges across the globe. Well respected outfits like Coinbase, Kraken and Binance all offer the opportunity and facilities to buy Bitcoin with your debit card. Mind you, only after completing the most stringent “Know Your Customer” applications I have ever seen. In fact, it is easier to open a bank account than it is to open a Bitcoin account, but that is a story for another day. Suffice to say that access to Bitcoin is more regulated but easier to use.
Despite what one reads Bitcoin is the most secure asset in the planet. It was Twitter that got hacked, not Bitcoin. It is fully decentralised proof of work proto - col that needs massive, gigantic, huge computing power for mining or minting, which keeps it safe as houses. This is in fact a major criticism of Bitcoin that it consumes so much electricity to keep it all running. Across the globe a complete network of disparate computers secure every single transaction on the blockchain that can never be tampered with.
So, while it may still seem all a bit strange and Matrix-like, Bitcoin and cryptocurrency is gaining adoption and traction at lightning speed. Hence why big institutions and potentially governments are looking more closely at it. It cannot undergo quantitative easing. Rather is wins by quantitative tightening. It is widely accepted as an asset class.
Greyscale Investments in the US are offering it as an asset class and currently it has $5 billion invested in its crypto funds.
But, while high net worths look at it as a good hedge and investment, some countries, without sovereign wealth funds, are seriously considering it to shore up their reserves. Why not Scotland?
I always hear that Scotland did this and Scotland did that. It was pioneering in medicine etc, blah blah blah. But, as we enter a new era post-coronavirus and laden with debt, could Scotland not steal a march on other countries by being first to add Bitcoin to its coffers?
I’m spitballing here so hear me out. How about Scotland borrows £10 billion from Europe. It then creates a wealth fund and buys Bitcoin. In today’s money that would by about 1.1M Bitcoin or about 5 per cent of all Bitcoin ever. Immediately that would send the globe crazy cutting supply and starting a rollercoaster of events. The price would rocket and other government and institutions would buy in on the fear of missing out. The price would jump by a factor of ten. Payback the £10bn and look like a Titan across the globe. Spitball over, back to reality…
It’s just a thought right? But, one that in two years’ time will have come to pass as one country buys Bitcoin as a reserve asset. I wonder if Scotland will be pioneering again?
Jim Duffy MBE, Create Special
In fact, it is easier to open a bank account than it is to open a Bitcoin account