Bitcoin was originally created to represent a currency without ties to a centralised bank. Anti-inflationary and cost effective, the advantages’ of Bitcoin are plain to see. Yet the digital currency remains relatively volatile in terms of price level, at this moment in time. Thus, could Bitcoin and other digital currencies have yet another secondary application?
London has always been associated as a hub for Financial Services. In 2012, the capital accounted for 50.5% of the financial sectors Gross Added Value to the UK economy. Britain, remains the 4th largest Country or state in terms of Venture Capital Investment, lagging behind America, Canada and China in Bitcoin enterprises. But could this all be about to change? Goldman Sachs, the Bank of England and Barclays, to name just a few, are investigating the prospects of using Bitcoins to reduce the costs of traditional financial practises. So could we be seeing London, as a leading front runner, in the digital currency World? Such is the current focus, that the Chancellor of the Exchequer has outlined £10 million worth of Governmental spending in Bitcoin research during the last budget.
Many retail outlets are now accepting Bitcoin as a form of monetary payment. The usage of every transaction is then stored on the cloud in a “virtual digital ledger/ spreadsheet” called, “the BlockChain”. The technology behind BlockChain would reduce costings for international payment transfers and by avoiding slow payment networks. Santander, the well-established Spanish retail bank has taken note of this, suggesting in a written report, that the implementation of blockchain technologies could save up to $20 billion, year on year by 2022. This would account for a considerable reduction in overheads. Another potential upside, is the faster clearing and settlement of trades by bypassing legacy systems. Now interestingly, if the grass is so much greener, why have we been holding off on the embracement of the transactional usage of cryptocurrencies?
One potential hindrance to the usage of Bitcoin by retail banks, is the legality of the origins of the currency. Banks have a legal obligation to ensure they do not contribute or benefit from the proceeds of crime. Naturally, the acceptance of Bitcoins earned through money laundering or a dark web drug market would land them in considerable trouble with the Regulators. With the anonymity of Bitcoin, the risks of being caught up in illegal practises far out-way the benefits of the currency usage.
Yet a London based Bitcoin firm, “Elliptic” have developed cutting edge software which has the capability to identify where the Bitcoins have emanated from. Elliptic, state that their system, can make a highly accurate guess at the possessor of the bitcoin wallet from which was used. The software itself spans through both the internet and dark web to indicate digital fingerprints which collectively point towards the origins of the digital currency. As of later this year, the system is to become compatible with existing banking software, allowing for the first time, the usage of Bitcoins in Retail and Investment Banking. We are standing on the precipice of a revolution fuelled by the financial sector in London. Which in turn can only add to the longevity of Bitcoin.
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