An Ideas-Based Online Magazine of the Global Network for Advanced Management

Bitcoin and Blockchain: A Currency That Doesn't Work as Money

What has been the impact in your country/region of increasingly popular cryptocurrencies such as Bitcoin? What are the greatest hurdles?

There is really not much of an impact of cryptocurrencies in Turkey yet to speak of. There are some websites that enable trading of Bitcoin, but the actual usage seems limited to a couple of (mostly on line) retailers for the moment. The greatest hurdles, like elsewhere, include lack of regulation, lack of familiarity and of course, the unstable nature of the cryptocurrency itself, which, as it stands, fails to fulfil the most basic functions of money – the medium of exchange and store of value. The regulators, notably the Central Bank of Turkey, are studying the issue, but it will likely take time before a regulatory infrastructure emerges or Turkey follows Japan’s lead in enshrining bitcoin as legal tender.

Can blockchain, the technology underlying Bitcoin, serve other purposes? What are potential applications? How should it be regulated?

The technology’s track-record speaks for itself. True, the future can always be different, but the technology has been around for about 10 years, yet the only application to my knowledge so far, has been the cryptocurrency itself. There are serious efforts to widen the usage to, say, “bringing financial services to the poor,” but various technical hurdles stand in the way.  In that sense, the whole issue – the revolutionary aspect of it or that it is like the internet -- feels a little overhyped.  Regulation as such is a very tricky issue because a key attraction of bitcoin is its anonymity or lack of regulation in the first place. So where would regulation stop? Bitcoin, in its essence, is a libertarian idea of sorts -- that it can exist privately, independent of governments. But this is almost impossible to achieve because as Prof. Ken Rogoff of Harvard reminds us, the history of currency tells us that “what the private sector innovates, the state eventually regulates and appropriates.”