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Bitcoin’s Disruption: Conflicting Opinions

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Acknowledging the Disruption of Bitcoin

Since Bitcoin’s creation in 2009, financial professionals have considered the new technology a threat to financial services.  The financial services industry moves, trades, stores, lends, and accounts for money.  In an article published by McKinsey and Co. Don Tapscott points out that each of these practices are challenged by Blockchain technology.  Tapscott was not alone in recognizing Bitcoin as potentially disruptive to financial services.  As visualized on the below Google Trends graph, Bitcoin attention has spiked since 2013.

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The disruptive nature of Bitcoin spurred public attention.  From 2013 to the present, major consulting firms such as Deloitte and McKinsey have issued reports on Bitcoin’s disruptive nature, with specific interest in the underlying Blockchain technology. Financial firms, such as Goldman Sachs and Morgan Stanley, are seeking to understand Bitcoin and employ tools such as the Blockchain, which is evidenced by their reports over the same period.

The consensus remains that Bitcoin is a potentially disruptive force. The effect of Bitcoin, and in particular Blockchain technology, may extend beyond the financial services industry.  This article examines professional, conflicting opinions regarding this disruptive reality.

Professional Opinions on Bitcoin Disruption

Paul Krugman: In December 2013, Paul Krugman wrote an article for the New York Times, “Bitcoin is Evil.” In his piece, his first qualm with Bitcoin is that it fails as a store of value.  Unlike gold or USD, it has no floor of value.  This criticism alone seems insufficient to label Bitcoin “evil,” but he proceeds to identify Bitcoin disruption as a threat to infrastructure, using a quote from Charlie Stross.

“Bitcoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind- to damage states ability to collect and monitor their citizens’ financial transactions.”

Krugman’s critique of Bitcoin technology is understandable, particularly in the wake of the Silk Road, which shed light on horrible illegal transactions, facilitated through the use of Bitcoin.  However, I believe he overlooks the benefits associated with the efficiency of a decentralized system.

Blythe Masters: The decentralized nature of Bitcoin that Krugman dislikes has inspired confidence and investment from Blythe Masters, economist and former executive of JPMorgan Chase.  Masters, recognized as a developer of credit default swaps, has invested time and money into the development and re-purposing of Blockchain technologies.  In a 2015 interview, she highlighted Blockchain technology’s ability to reduce risk as a motivator for her transition into the FinTech industry.  Her faith in Blockchain technology led her to acquire the CEO position at Digital Asset Holdings, a Blockchain technology company providing settlement and ledger services.  Master’s faith has not been misplaced.  Digital Asset Holdings opened a London office in January 2016, and hired eight new executives as of August 2016.

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