IBS Journal May 2015


‘It [Bitcoin’s underlying technology] is a definite improvement on the systems that banks have at the moment, such as Swift, that are expensive


and very centralised.’ Erik Wilgenhof Planter, itBit


licence in the US, with agreement in principle and final approval awaited, and hopes to do the same shortly in Singapore. The regulatory stamp of approval is important to build trust, Plante points out, and the exchange will be audited as is the case with any other financial institution. The regulators across the globe are


finally starting to move towards regula- tions that will be specific to virtual cur- rencies, with increasing interest as well from law enforcement organisations, including Interpol and Europol. The lat- ter two ‘see a crook in every shadow so it is up to us to convince them that this is not the case’, says Plante. He believes that regulators around the globe are waiting for the lead of the New York Department of Financial Services (DFS). The DFS has proposed a ‘Bitlicense’ reg- ulatory framework for New York-based virtual currency businesses. The supposed anonymity of bit-


coin is actually somewhat misleading, Plante believes. ‘It is a very small mar- ket, so a few hundred dollars or pounds in the market will move the price so much that everyone will be looking at you.’ He feels this works against those


involved in organised crime who might want to use bitcoin, meaning that they cannot launder large amounts of mon- ey. ‘It takes too long to trickle into the system, sell it, and hope that no one notices.’ As appears to have been the case


with MtGox, another vulnerability is hacking. For this reason, itBit uses ‘cold wallets’, which are offline until the moment someone wants to move bit- coins, at which point there are a lot of security checks. To date, ‘touch wood’, itBit has avoided attack but Plante admits that it is a major challenge. Where customers are defrauded, it is mainly through phishing. ‘Now, organ- ised criminal gangs hire hackers, they can pay them a lot of money, and they can find ways to get into your system that you cannot think of.’ Institutions cannot match the pay of the criminals and ‘you are only as good as your best programmer’. Finally, where is the whole bitcoin phenomenon heading? It could go two ways, says Plante. It could disappear like so many technologies that haven’t made it. However, he feels that the underlying technology is in some ways


more interesting than the virtual cur- rencies themselves. ‘It is a definite improvement on the systems that banks have at the moment, such as Swift, that are expensive and very cen- tralised.’ A bitcoin transaction, using the blockchain technology, takes around five minutes and might cost four cents or less, which is a stark contrast to the time and cost of traditional cross- border payments. ‘If, as an industry, we can gain more trust, it will definitely take off and banks will get more inter- ested,’ concludes Plante. In many quarters, that trust isn’t


there yet but there is no doubt that awareness of the blockchain technolo- gy is increasing and banks are waking up to the threats and opportunities. Ultimately, the virtual currency sector is an immature one that has had some high-profile growing-up pains but reg- ulation is on the way and, as reflected in the ‘cold wallet’ model, some of the lessons have been taken on board. The shift of people from financial services to this new world is a trickle at the moment but if others follow where Plante has led, then this can further help the evolution.


© IBS Intelligence 2015


www.ibsintelligence.com


27


ibs interview


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