UBS Likes Bitcoin — They Just Don’t Know it Yet

By Kyle Torpey Oct 29, 2014 7:39 PM EDT

UBS and bitcoin

NEW YORK (InsideBitcoins) — In a recent profile of UBS CIO Oliver Bussman in Financial News, the chief information officer was found to be a believer in blockchain technology. This follows the general sentiment that came from a full UBS report on bitcoin earlier this year in which the bank seemed pessimistic about the long-term viability of bitcoin as a currency.

The recent statements from Bussman should be applauded by bitcoin enthusiasts, as it means he’s on the normal path towards adoption of bitcoin as more than just a technology.

UBS does not like bitcoin

Although UBS has shown that they understand the value of tax evasion in the past, it does not seem that they are bullish on bitcoin as a vessel for tax evaders of the future. Perhaps they are not fans of the new, unrestricted competition.

In a report from late March of this year, analysts at UBS noted, “Bitcoin’s speculation-driven volatility prevents it from being a stable store of value or unit of account.” The report went on to note that there are a variety of “economic, technical, and regulatory challenges” that make adoption as a true currency unlikely.

UBS has a solution

In both the report from earlier this year and the recent comments made by UBS CIO Oliver Bussmann, there is an acceptance of bitcoin as a technology. As Bussmann told Financial News, “When somebody with a strong brand and security level establishes it as a reliable service, then the whole industry will follow.”

Although UBS’s report from March was not bullish on bitcoin as a currency, they noted, “A bitcoin-like system could provide enhanced security and lower costs, by giving users direct control of their funds and the ‘private key’ which is used to ensure security through encryption.”

In other words, UBS thinks it would be a good idea to create a centralized blockchain. Obviously, this misses the main value proposition of bitcoin, which is censorship resistance. After creating such a system, bank customers would be able to use a blockchain that tracks all of their transactions and censors certain types of payments. That means they would be able to use a more cost-effective version of PayPal or a traditional bank. Not quite a revolution in money.

UBS does like bitcoin

It seems clear that Oliver Bussman and the rest of UBS do like bitcoin; they just don’t know it yet. They are dealing with the same logical fallacy as Paul Krugman and many other detractors of bitcoin as a currency. After all, admiration of bitcoin as a technology means that you must also admire the unit of account used in the payment protocol.

It has been proven time and time again that the individuals who only see bitcoin useful as a technology simply do not understand how it works. When you remove the bitcoin unit from the protocol, you are left with something that does not resemble the original concept of bitcoin at all.

We don’t need a blockchain run by a third party. We have PayPal for that.

You can follow @kyletorpey on Twitter.

Photo credit: twicepix

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