Back in 2013, when Profit & Loss first started writing about this new digital currency that was creating a buzz called “bitcoin”, most mainstream financial services firms wanted nothing to do with it.
Yes, a few banks and other large firms were starting to put out some research papers about bitcoin, but this was generally more symptomatic of the fact that it represented something new and novel rather than because these institutions felt that this new asset merited any serious attention.
A number of high-profile scandals – most notably the exposure of Silk Road as a marketplace for the purchase of illegal substances and services and the collapse of Mt.Gox, which was at the time of its demise the biggest digital currency trading platform in the world – meant that most mainstream financial services firms, and especially heavily regulated ones, were even more reluctant to go near bitcoin.
The digital currency didn’t disappear though, and indeed more and more new types of digital currencies, increasingly referred to as cryptocurrencies, appeared in the market. But it quickly became apparent that the hype had shifted towards the technology underpinning it, the blockchain. Whereas cryptocurrencies were viewed as toxic by most financial services firms, blockchain was pure technology which was distinct from all the unsavoury elements associated with bitcoin.
There was clearly a hype bubble around this technology, which at one point was being touted as the solution to a ludicrously wide range of issues, leading skeptics to claim that it is merely an interesting solution in search of real problems to solve. But by 2017, blockchain fatigue appeared to be kicking in and Profit & Loss reported that the pendulum was swinging back, with an increasing number of financial services firms taking a second look at cryptocurrencies as the value of these assets began spiking.
In the subsequent two years, consider what we’ve seen: a massive bull market in cryptocurrencies followed by a painful bear market and now (somewhat) of a recovery: an ICO-mania and the introduction of new types of crypto coins and tokens; JP Morgan, whose CEO famously once called bitcoin a “fraud”, launching its own digital currency; household names (at least in financial services) like CME Group, Intercontinental Exchange (ICE) and Fidelity offering services around cryptocurrency trading; and Facebook announcing a vastly ambitious plan to launch a new cryptocurrency designed for payments.
In just this short period of time outlined here, we’ve gone from a world where most financial services firms were openly scorning bitcoin and other cryptocurrencies as vehicles for criminal activities to one in which central banks around the world are looking at potentially launching their own digital currencies.
Which is why Profit & Loss is opening its Forex Network Chicago conference with a panel session addressing the question: Is the Future Digital?
What do people mean when they talk about the “digitisation” of existing financial markets? What are the implications of central bank digital currencies? Will Facebook’s new crypto project lead to the creation of an online global reserve currency? From cross-border payments, to real-time settlement and from reduced transaction costs to portfolio diversification – what will be the real value of digital assets? Moreover, who are likely to be the winners and losers in this brave new digital world?