The article, “ MBA view: will bitcoin regulation undermine its value? ” (May 16), made disappointing reading, as my fellow MBA colleagues were unable to go deeper than the superficial analysis of bitcoin prevalent in mainstream discourse.
Firstly, bitcoin is not simply a new asset like oil or equities. Bitcoin is a monetary asset, and thus, by definition, is entirely speculative in nature. Bitcoin is thought to be the hardest money created to date, epitomising the school of Austrian Economics. Due to totally inelastic supply and variable demand, volatility will remain high until the rate of entry of new money into the ecosystem is dwarfed by that already inside.
Second, the narrative that “blockchain technology” is the true value underlying bitcoin is false. Rather, bitcoin is the underlying monetary asset around which economic incentives are aligned such that millions of actors across the globe are able to reliably operate/trust a decentralised, distributed ledger of ordered, immutable transactions — ie: a blockchain. The value is not in the technical architecture of the distributed ledger, but that the data inside it can be trusted without the need for third-parties.
Regarding regulation, the question is not whether bitcoin will be a target of regulation (it will) and resultant short-term impacts on pricing. Rather, as an open-source software project without any leadership, a globally decentralised operating model and a proven dynamic resilience to attacks, can financial regulators control this emerging digital monetary asset at all in the long run?
MBA Westminster Business School,
London, E8, UK