Almost a year ago, Noreen Harrington, the Wall Street veteran known for her role as a whistle-blower during a 2003 mutual funds scandal, was at a speaking engagement in Bonita Bay when someone asked her what she thought about bitcoin.
“My answer was, ‘I don’t know enough to have an opinion,” she said. “I walked out of that room really mad at Noreen Harrington.”
Harrington said she was committed to learning all that she could about the digital currency after that encounter.
On Friday, she and Christian Martin, chairman and CEO of Tera Group and a founding member of the Wall Street Blockchain Alliance, shared their bitcoin knowledge with guests at a Speakers Assembly of Southwest Florida luncheon.
Bitcoin is a type of cryptocurrency, or digital currency, that is stored in digital wallets and can be sent through the Internet.
Bitcoin can be sent from person to person, even internationally, without a middleman, such as a bank.
“If you want to do a transaction now to someone in Dubai, I can transfer that money digitally to them instantaneously,” Harrington said. “That is the power of a digital wallet with cryptocurrency in it. Money is transferable instantaneously around the globe.”
Bitcoin was created around 2009, at the height of the credit crisis, by an anonymous person referred to as Satoshi Nakamoto.
The context of when bitcoin was created is essential to understanding how the currency has taken off, Harrington said.
“People were not secure about the banking system, and people were very nervous about the banks,” Harrington said to the Speakers Assembly audience Friday.
The rise of bitcoin is attributable to the increased use of the internet, Martin said.
Every transaction made using bitcoin, or other types of digital currency, are recorded on blockchain, which is a digital log of every cryptocurrency exchange.
Although blockchain does not reveal the identity of the people who make transactions with cryptocurrencies, it does log the identification of their digital wallet.
That level of privacy can be appealing, Martin said.
“You can do it privately. That’s attractive to a lot of people that have nefarious motives. It’s attractive to a lot of us that don’t have nefarious motives,” he said.
Harrington, who has a reputation for finding fraud, said when she first looked at bitcoin and blockchain she thought it would be a magnet for money launderers.
She changed her mind after learning more about the technology behind blockchain, Harrington said.
“What I realized is it’s actually going to be easier to check all the transactions on this ledger. I think, in a way, it makes, or should make the fraudsters more nervous about transactions,” Harrington said. “Is there a deviant element of this money today? Yes, there probably is, but that doesn’t mean the technology or digital currency isn’t a change that’s going to happen.”
Like fiat money, such as the paper bills or coins a government declares have value, bitcoin and other cryptocurrencies have similar issues with security, forgery and bad actors, Martin said.
But bitcoin tokens themselves can’t be hacked, Martin said, rather, it is where bitcoins are stored that is vulnerable to hackers.
As the value of bitcoin continues to rise — one bitcoin was worth more than $11,000 as of Saturday, according to Blockchain.info, a news and data site — Martin said regulators are working hard to understand and become comfortable with the currency. He said the U.S. Treasury has labeled bitcoin as property for tax purposes.
While there are thousands of cryptocurrencies that have been created, bitcoin can claim the title of first, Martin said.
“Think of bitcoin as the Model T. It’s the first one out of the gate, but it doesn’t mean it’s going to be the last one or the best one,” Martin said.
As blockchain and bitcoin continue to take off around the world, Harrington said the technologies will have major implications for everyone.
In the way that companies such as Amazon, Neflix and Google have taken over their industries, bitcoin and blockchain may have similar and even greater impacts on businesses, she said.
“If you go to Wall Street terminology of category killer, I’m about ready to tell you that blockchain and bitcoin are serial killers,” Harrington said. “They are going to cut through multiple industries and change them forever.”