The cryptocurrency world has been full of more of the same. More startups that look the same, the disappointed expectations that the crisis in Greece would somehow lead to widespread adoption of Bitcoin and the neverending parade of arrests, convictions and guilty pleas. A minor detail of yet another “fork” in the ledger due to , wait for it, inconsistent soft versions. (In a decentralized system? Who’d ever imagine there could be configuration problems?)
Oh, and Reddit ran aground on the reefs of monetization.
In the background, the Bitcoin community has been facing very significant issues. Basically, Bitcoin is growing up, and it is discovering that there is more to life than adolescent fun and rebellion.
Pete Rizzo published an interview with Martine Niejadlik, former Compliance officer for Coinbase. This would be someone charged with keeping a Bitcoin business inside the law. Providing anyone knows what the law actually is. As she notes, cryptocurrency does not fit conventional categories neatly, and as a result is treated differently by different regulators and jurisdictions.
Besides the question of what laws even apply, cryptocurrency does not fit conventional business models, including accounting and risk estimates. This makes is difficult to work with conventional companies, who have no firm grasp of the risks or values involved. All that cryptocurrency might worth a lot or nothing at all. Parts of the system are quite secure, other parts will crash as soon as someone presses the wrong key. And it might be completely against the law. How you do business with that?
For example, Charles Cowen reports in Coindesk about the insurance industry’, which is highly regulated—and all about understanding risk. When faced with a cryptocurrency business, they will have to assess many standard questions, but also: “insurers must often first address the important questions of:
- Whether they can legally write the risk in the way proposed.
- What, if any, reputational issues might be implicated.
- Whether enough information is available appropriately to assess and value the risk.”
I have wondered how these companies ever get insurance at all. I mean, the assets are intangible, apparently highly volatile, and there certainly is no history to create any kind of mathematical risk model.
In a sense, these are great problems to have, because it means you are working in the real, grown up world. On the other hand, these things cannot be tackled by a “couple of guys in a garage” startup.
On the other other hand, I’ve been hearing the same thing for several years now, and there has been little progress. Plenty of of chatter and propaganda, but not much real advance.
I would also comment that some serious attention from academia would be useful at this point. The academy has been AWOL from cryptocurrency for years now, and it is beginning to show: there is a crying need for open, critical, and well informed examination of cryptocurrency frommany angles.