Wall Street is beginning to catch on that bitcoins will evolve beyond merely a virtual currency, and become a payment system in the future. Adding impetus to bitcoin’s evolution is the fact that well-known companies such as Overstock.com, Inc. (NASDAQ:OSTK) and the Sacramento Kings NBA basketball franchise decided to accept bitcoins as a payment option for their customers. A politician running for the state senate in Texas is also accepting the virtual currency for campaign donations, according to report from Bloomberg.
Evolution of a payment system
In December, Overstock.com, Inc. (NASDAQ:OSTK) CEO Patrick Byrne confirmed that his company was working on the details of accepting bitcoin because he believes that “bitcoin is good money”. The company intends to work independently of bitcoin payment processors. However, he also indicated that if the company sees insignificant number of purchases using bitcoin after two years, it will likely stop accepting it.
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In a telephone interview last Tuesday, Sebastien Galy, a New York based senior foreign exchange strategist at Societe Generale SA (EPA:GLE) (OTCMKTS:SCGLY), told Bloomberg, “Bitcoin, in essence, is just an evolution of a payment system. The ultimate concept of transaction, the innovation, is certainly progress in the means of transaction.”
On the other hand, Steven Englander, head of currency trading for major industrialized nations at Citigroup Inc (NYSE:C) commented, “The original Bitcoin was designed to operate outside the financial system. There is nothing to stop existing payments processors from adopting generic Bitcoin payments technology.”
“Most businesses that accept Bitcoin do not hold it. So they’re now using it simply for transactions and not as an asset,” added Englander.
Anonymous bitcoin inventor
The real identity of the person or team responsible for developing bitcoin remains unknown, as they operated under the pseudonym Satoshi Nakamoto. Since its introduction in 2008, bitcoin has become highly successful and its value has ranged as high as $1200 per bitcoin over the past 12 months.
IT pioneer Ted Nelson believed that Satoshi Nakamoto is none other than Prof. Shinichi Mochizuki, research professor of Mathematics at Kyoto University. According to him, Nakamoto and Mochizuki both typically publish through unconventional academic channels without discussing their work.
Warnings against bitcoin as alternative currency
The People’s Bank of China recently prohibited banks and other payment companies from using bitcoin as an alternative currency, citing that it poses a threat to the financial stability of the country because it is not real money. The central bank said banning the bitcoin was necessary to protect the yuan as the statutory currency.
Last December, the European Banking Authority (EBA) issued warnings regarding risks related to buying, holding, or trading virtual currencies such as the bitcoin. The EBA emphasized that consumers are not protected when using bitcoin as a payment and they are at risk of losing their money because the exchange platforms are unregulated.