“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.”
Taken from ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, by Satoshi Nakamoto
Bitcoin (“BTC”) was issued ten years ago and is still polarising risk and compliance professionals. Whether you believe that it is a force for good, or that it is simply a disruption that we could have lived without, there is no doubt that it is here to stay.
So, what can we expect in the next ten years?
I predict a very different future, with global standards and regulation adopted, even in those jurisdictions that are currently prohibiting its use. Why? To prevent regulatory arbitrage and to enable new challenger firms to harness the opportunities that are presented by blockchain.
We will have a regulated and unregulated sector, rather like we have today with banks and ‘Hawaladers’, and we will continue to have to manage the risks in havens of secrecy that are offered by Altcoins, rather like we do today when payments and value passes or is held in jurisdictions with higher levels of data security. According to the risk based approach, there will be adoption of global standards in how to identify and detect ‘shell banking’ risks that will be applied, just as we apply these today to manage correspondent banking risks and third party reliance. In short, the risks of managing value transfer will be the same, but look different, because the nature and aims of criminals will largely remain unchanged. ‘Old crime, new technology’! We will be required to find a way forward.
In my crystal ball I also see coins published by major financial institutions, jurisdiction coins such as ‘ruble coin’ and new players from hitherto undisclosed new entrants. The name of BTC has become synonymous with ‘crime’ simply because criminals have acted faster than regulators to utilise its features, but would you be more inclined to trust BTC if it was actually released under another name by for example Microsoft or Apple to support financial inclusion and was supported by Bill Gates for good causes? We trust their devices and use them to convey messages and critical personal data, so why not value?
Whatever the future holds, it is going to be interesting, and I very much hope to be part of history, and to have the opportunity to witness the changes and evolution of this fascinating and exciting technology over the next ten years!
Thank you Satoshi Nakamoto!