Bitcoin, an anonymously digital currency, is an online virtual “barter good” that is currently gaining ground as an alternative to dollars and euros. Bitcoin recently “drew international attention through Cyprus’s banking emergency, its inclusion in the American financial regulatory framework, and increasing coverage.”
Bitcoins are generated electronically, and “the whole thing is run by powerful computer systems owned by people called “miners.” In this new world of virtual currency, the use of Bitcoins can have some advantages over paper or plastic.
In the United States, Bitcoins are mostly unregulated. Canada, however, has a much stricter regulatory environment, as several businesses and entrepreneurs have found out. Just recently, James Grant of Canadian Bitcoins and Melvin Ng of CAD Bitcoin, both of whom operate Bitcoin exchanges, were contacted by the Royal Bank of Canada and TD Bank and informed that their accounts would be frozen. The banking authorities have not explained their reasoning, but to Grant, it’s obvious: “They don’t like Bitcoins.”
Joseph David, who owns Virtex, an online market-based in Calgary that matches Bitcoin Buyers with sellers, was informed earlier this month by the Royal Bank of Canada that it would no longer do business with his establishment. “They shut down our account without any reason,” David said. For reasons unknown, many of Canada’s banks are hostile to the small but fast-growing Bitcoin businesses, but what is becoming increasingly clear to some is that “they don’t like the cryptocurrency and they’re shutting down some of the accounts of business that deal with it.”
Mr. Ng maintains that banks are undoubtedly feeling threatened by this new virtual currency, “as Bitcoins will soon replace the need for banks to transfer money across borders.” He goes on to say, “Bitcoins will revolutionize the banking industry, just like BitTorrent changed the video and music industry.” Conversely, many in the banking industry warn that Bitcoins are “inherently unstable,” pointing out the fact that the currency has been extraordinarily volatile, “with the value of a single Bitcoin ranging from less than $1 back in 2008 when it was first created to as much as $260 earlier this month.”
Nonetheless, Bitcoins are seen by many as having both great advantages and great risks, and whether this virtual “money” will take hold is still to be determined. Perhaps the statement, “If the Internet is the Wild West, Bitcoin is its wampum,” sums it up best.