In a recent interview on the Epicenter Bitcoin podcast, Bitnet Co-Founder and CEO John McDonnell was asked a wide range of questions regarding the future of Bitcoin. Although most of the conversation surrounded Bitcoin as a payment system, Epicenter Bitcoin Co-Host Sébastien Couture eventually brought up the topic of bitcoin as a currency. By the end of the discussion, it became clear that McDonnell, who previously worked at Visa and CyberSource, was quite bullish on bitcoin’s long-term prospects as a currency.
Convincing Consumers to Hold Bitcoin
Although Bitnet and other Bitcoin payment processing companies have been able to convince some big-name merchants to accept this new form of digital money, there is still a gigantic issue on the consumer side; not many people are willing to hold bitcoin right now. This is mainly due to the wild price fluctuations that have plagued the cryptocurrency throughout its short history. Having said that, the stability of the bitcoin price has improved over the course of 2015. Bitnet CEO John McDonnell noted this point during the interview when asked directly about his thoughts on bitcoin’s future as a currency:
“I do think it will become a currency. If we look at the last six months, the volatility really has decreased dramatically. The price has been trading within sort of a $200 to $300 [or] $275 band for several months. And I think that’s important for establishing the confidence by consumers to hold bitcoin for some period of time.”
McDonnell also brought up the fact that bitcoin may already look more attractive than local currencies in some economically-troubled countries around the world:
“In some cases, they don’t trust their own, sovereign currency, so it’s a store of value. The volatility of bitcoin might be more attractive than their central-bank-issued sovereign currency.”
Bitcoin has compared favorably with at least one sovereign currency (Venezuelan bolivar), this year, but it still has plenty of work to do when it comes to competing as a unit of account on a global scale.
— Prof. Steve Hanke (@steve_hanke) July 27, 2015
People May Choose Bitcoin Over Central Banks
While there are some individuals in places like Argentina and Venezuela who prefer to store bitcoin rather than the local currency, McDonnell took this phenomenon to a completely different level during his interview. Although the idea may seem crazy to the vast majority of the general population right now, it appears that the Bitnet CEO sees bitcoin as a possible alternative to central banking in countries dealing with serious currency issues:
“I do believe that — given situations that we have in a couple countries in South America, for instance Venezuela or Argentina . . . there could very well be a situation where a central bank . . . I don’t know a particular example where this might happen, but a populus government takes over through some vote [in] a country and just basically bans the central bank. They say, ‘You know what? We’re on our third currency in twenty years. This is not working. We can’t trust ourselves or our finance ministers anymore to issue a sovereign currency. By default, a lot of these countries use the [US] dollar as a primary reserve currency, but I don’t think it’s out of the realm of possibilities that one of these countries is going to turn to bitcoin. I think that would be a very interesting phenomenon in the sense that the rest of the world would then have to accept it as a sovereign currency — because it would be.”
The idea of bitcoin as a global reserve currency has been floated by bitcoin enthusiasts in the past, and there are also plenty of economists and central bankers discussing the idea of a “Fedcoin.” It’s possible that something like Bitcoin will be integrated into fiat currencies eventually, but it’s unclear if bitcoin (the currency) will be part of the equation. The scenario outlined by the former Visa Senior Vice President would require a revolution in a troubled country at the grassroots level. Having said that, there are a few problematic fiat currencies out there that could, perhaps, inspire such an event.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.