Forget the Euro and its never-ending crisis, Bitcoin is the hot currency story for mainstream news outlets nowadays. Whether it’s an extraordinary rise in value, a stunning theft, or a controversy over a media ‘outing’ of its supposed inventor, there are plenty of Bitcoin headlines to be had.
But are digital currencies really the future? Silicon Allee spoke with Radoslav Albrecht, who founded Bitbond.net, a global peer-to-peer Bitcoin lending platform. Bitbond enables its users to secure a personal or small business loan without a bank account from anywhere in the world.
Radoslav will give a talk about the digital money revolution at re:publica 14 in May.
SILICON ALLEE: Tell us why you applied to be a speaker at this year’s re:publica.
RADOSLAV ALBRECHT: I really like the motto, Into The Wild. We don’t know how digital currencies will evolve, and it really is a journey into the wild. Since I deal with Bitcoin every day, I thought that this might be an audience which would be interested in this topic.
SA: You have a background in traditional financial services. Why make the change to working with digital currencies?
RA: I wanted to start my own business. But if you’re talking about the traditional world of financial services, it’s not that easy to run a startup. The infrastructure that you need is very costly; you have to fulfill a lot of regulatory issues. Then I discovered digital currencies like Bitcoin and I thought, wow that’s a great opportunity.
SA: Is Bitcoin a fad or is it a clue as to how currencies will look in the future?
RA: I think it’s the latter. I really think Bitcoin shows us what it is going to look like in the future. It might not be the digital currency that will be the most popular one in the next five or ten years; we don’t really know this yet. But it opens a path that did not exist beforehand. There have been other attempts to make digital currencies like Bitcoin but they failed for technological reasons, and Bitcoin is the first one that actually is a functioning digital currency that is run on an open source basis. So it opens a whole new world based upon which other, maybe even better digital currencies will be possible.
SA: Bitcoin currently seems to be limited to a core of knowledgable users. Will it be possible to persuade the masses that it is something they can trust?
RA: I think so, for two reasons. One reason is that the advantages or the benefits that you have as a user when you use digital currencies in certain areas are that much better compared to using a tradition currency that there will be a good reason for many people to at least give it a try. Once you’ve tried it and you looked at it a bit more closely, and seen how it works, you can judge it for yourself.
The other thing is that it is perfectly natural for the masses to at first be cautious when there is something new. It’s just like with the Internet in the beginning, lots of people didn’t trust it and thought, well I really don’t know what’s happening there. Maybe you can compare it to email – at the beginning, maybe people didn’t trust it as much as they do today. Once the adoption in terms of numbers of users goes over a certain threshold, however, people will just trust all the others. But I am not sure if we have already passed this threshold with Bitcoin.
SA: Surely, however, there is a difference in building trust in emails and in doing so with people’s money?
RA: I think that this trust factor is a reason why it takes longer than with email, for instance. If you look at what my company deals with, P2P Bitcoin lending. Just from the pure facts, using P2P lending either as a borrower or as a lender, this is by far better than being a customer of your bank.
SA: Talking about Into The Wild, is there a general lack of regulation where digital currencies are concerned?
RA: Of course regulations differ from country to country, if there are any at all. If we look at Germany, which is relevant for me because Bitbond is based in Berlin, the good thing is that the German financial regular BaFin mentioned Bitcoin in 2011 and said that Bitcoin is actually a financial instrument that is treated like another foreign currency in certain areas. That’s good because we know what it is from a legal standpoint and we know which regulations apply. And the other positive is that the regulation is not very heavy – a good thing for people who run Bitcoin startups in Germany. Not everything is clear, but at least you have a starting point.
For isntance, I wrote a letter to BaFin where I outlined my view on how Bitbond is regulated (or not, depending on which part of the law we’re looking at), and now they will reply to say whether my opinion on this is correct or not from their point of view. So it’s still in the making, I would say, to actually clarify it completely.
SA: Will Bitcoin become more heavily regulated as its use increases?
RA: I believe that it will. Once the regulators see that there is a significant amount of transactions going on, and that the entire Bitcoin ecosystem is growing, I think that the regulation will advance and will become more similar to traditional financial regulation, for instance the traditional loan business that banks are doing. However I hope that it is not going to go too far, because a lot of advantages that we have with digital currencies like Bitcoin could be diminished. So I hope that the regulators will act wisely.
SA: How you trying to ensure that they do?
RA: Along with some other people from Germany who also run Bitcoin startups, we founded an association called the Bundesverband Bitcoin e.V. We are planning to enter into a dialogue with at least the German regulator to explain to them what Bitcoin actually is and what the advantages are, and to discuss with them which regulations are meaningful and helpful and which could go too far. And we hope that they will be open to the dialogue.
SA: In the introduction to your talk at re:publica, you say that digital currencies like Bitcoin can help democratise money. But aren’t national governments, while not perfect, still the best form of control to have over currencies?
RA: If you believe that the government is the best provider of a currency you can still use the Euro. And I believe you will never be forced to use a digital currency. So if you believe that currencies that are issued by governments are the best form of currency, you will still be able to use them. But as long as digital currencies exist you will have a choice. To be honest, it’s not perfectly clear whether digital currencies will always hold the promises that they are making right now, but the good thing is that we can find out. So far, it has not been possible to find out because you had no choice. But now we will be able to see, from today from my point of view, whether this experiment will actually hold the promise that it makes. And everybody has a choice.