Gauci-Maistre Xynou (Legal | Assurance) | View firm profile
Billionaire and
crypto investor Tim Draper envisages a radical overhaul in payment systems;
predicting that cryptocurrencies will replace fiat currencies within the next
five years.
Billionaire and
crypto investor Tim Draper envisages a radical overhaul in payment systems;
predicting that cryptocurrencies will replace fiat currencies within the next
five years. Following the unprecedented
announcement by the first major bank to have ever created its own digital coin,
the ‘JPM Coin’, one wonders whether such an endorsement of blockchain
technology by a credit institution is the first step in a series of events
which will ultimately lead to Draper’s prediction becoming a reality in the not
so distant future.
This prediction was
expounded during an interview held on 18 February, 2019 with American financial
news TV channel Fox Business [1]
during which Draper explained that cryptocurrencies will be used for any
day-to-day mediocre transactions, emphasizing that only criminals will want to
continue in dealing in cash. As a
result, fraudsters and criminals resorting to cryptocurrencies will end up
being caught since only cash offers total anonymity. The notorious Silk Road case[2]
amply demonstrates that cryptocurrencies, despite having gathered negative
money laundering connotations, are nowhere close to being as anonymous as any liquid
cash.
In fact, in an
attempt to ensure that cryptocurrencies do not bypass legislation, the European
Securities and Markets Authority (‘ESMA’) while pointing out money laundering
amongst one of the significant risks of crypto-assets, believes that all
crypto-assets and related activities should be subject to anti-money laundering
regulation[3]. Such a regulatory measure would rubber stamp Draper’s
prediction.
Another praiseworthy
characteristic of cryptocurrencies noted by Draper, concerns the security
surrounding cryptocurrencies. Draper
observed that cryptocurrencies are more secure than money stored in banks,
given the fact that banks are constantly under hack attacks. The very recent BOV cyberattack in February
and its far-reaching potential repercussions serves to strengthen such an
argument.
Despite the 2018 cryptocurrency
crash, Draper assertively predicts that “the future is Bitcoin and other
cryptocurrencies”. The projected change
within payment mechanisms is far from being Draper’s first astounding prediction. Less than a year ago, Draper had anticipated
that governments would be going virtual within the next five to ten years as a
majority of governmental services will be provided virtually due to blockchain
technology and cryptocurrencies. Given
the capability of blockchain technology to affect the largest regulatory
authorities in the world, Draper had envisaged governments to start
utilising blockchain
technology in an attempt to “compete for us”.
Without going into
the issue of whether governments will indeed go virtual it is worth observing
that governments have already started shifting their focus to consider possible
uses of blockchain so as to provide citizens with more effective governmental
services. Potential uses for blockchain
technology by governments include supply chain, health records, transportation
and voting. Meanwhile, the European
Union Intellectual Property Office (‘EUIPO’) is currently investigating the
process of combating counterfeiting through blockchain[4].
On a local level, in the
2019 Maltese Budget a commitment to continue building on the strategy for
blockchain technology was announced. Furthermore,
moving on from last year’s hype of the ‘blockchain Island’, the government’s
focus is now shifting towards providing a regulatory framework for Artificial
Intelligence (‘AI’). In this respect, the
government will be enacting a bill giving a decentralized autonomous
organization (‘D.A.O.’) its own legal personality; another innovative first which
will be attributed to the blockchain Island.
In light of such initiatives,
Draper’s prediction of virtual payment systems does not remain otherworldly. Nonetheless, the prediction has undoubtedly
been met with mixed reactions. While
governments may be in a rush against time to adequately cope with this
revolutionary prediction/reality, crypto investors are at a loss as to whether
transferring Bitcoin into fiat currencies is the equivalent of “transferring
gold into shells”[5].
[1] https://www.foxbusiness.com/business-leaders/billionaire-tim-draper-reacts-to-jamie-dimon-launching-his-own-cryptocurrency
[2]
Decided on 31st May 2017 by the United States Court of Appeals,
Second Circuit:
https://caselaw.findlaw.com/us-2nd-circuit/1862572.html>
accessed 11th March 2019
[3] European
Securities and Markets Authority, ‘Advice – Initial Coin Offerings and
Crypto-Assets’, [2019]
[4]
https://euipo.europa.eu/ohimportal/en/news/-/action/view/4963920> accessed
22nd February 2019
[5]
Fox Business (n1).