It all started, as interesting conversations often do, in the pub. To be specific, an upmarket wine bar in Edinburgh's thriving financial district a day or two before the COVID-19 pandemic lockdown. My single malt companion suddenly exclaimed: 'Digital gold? More like, what was I thinking?' We were discussing cryptocurrencies, a still relatively new concept introduced to an unsuspecting marketplace as a reaction to the 2008 financial crash. Novel supposedly get-rich-quick schemes based on the mantra of an unfettered medium-of-exchange involving digital cash asset investments.
Significantly, outwith regulatory control, this has contributed to a spike in cryptocurrency double-dealing transactions with rising numbers of investors losing everything. Simultaneously exposing a more insidious side to Bitcoin, twin concerns over lack of transparency and online security represent unintended consequences for the freewheeling creators of digital money.
Such internet-based currencies have displayed extreme volatility and fluctuations in worth. One Bitcoin reached parity with a single US dollar by early 2011. By 2014, it was worth a cool $1,000 but in an early sign of shakiness, the price plunged 30% in one week in 2017 for no apparent reason. Recovery did occur and within months the digital currency reached $5,000 a unit, rising to almost $20,000 within a year – remember this is for a single Bitcoin – to then plummet to $3,300 the following year.
As this was being written, a Bitcoin stood at an apparently healthy $10,000. No-one really knows whether that figure will double or plummet but one thing is for certain: digital cash dealings are closely monitored by the marketplace, especially scammers who, more often than not, leave in their wake an untraceable digital trail along with their victim. Cryptocurrencies represent a playground for online predators preying on unwitting speculators. The fraud regularly occurs via the internet's 'alter ego' – the dark web – reputed to be three times the size of the official net and where drugs and firearms are also traded. Latest reports state that Bitcoin's creator is the brother of infamous drugs kingpin, Escobar.
Cautious investors are now questioning whether they should be buying something they cannot actually handle, as it's all done electronically. International markets, risk averse at the best of economic times, are not convinced of such virtual currencies, especially now recession looms post-coronavirus.
Growing numbers of 'news' releases clogging up my mailbox continue to hype the crypto cash route as a dead cert to make a fortune. Numerous reports tell another story of how one can become a hostage to misfortune. Regularly, an unwitting individual or couple are persuaded to hand over their life's savings to a non-existant cryptocurrency trading platform, discovering too late that it doesn't exist and they're subject of an elaborate fraud. The police raised £240,000 in the first ever UK auction of online stash seized from a TalkTalk hacker. In the US, a 21-year-old was jailed for 10 years after stealing $7.5 million in virtual coins by hacking cell phones, and a Californian judge gave the go-ahead for a lawsuit against AT&T after a subscriber's phone number was used by a cybercriminal to steal $24 million.
reports that the Chinese are looking at a proprietorial version of cryptocurrency, through the People's Bank of China sitting alongside the Renminbi/Yuan, as an all-powerful online tool for social stability. Translate this as social control?
Facebook has experienced resistance to its planned 'Libra' cryptocurrency. Even one of the world's most powerful companies faces intense scrutiny from finance authorities who are worried that it will undermine national money control. After all, we are talking about the mighty dollar.
Significantly, Goldman Sachs has marked down cryptocurrencies like Bitcoin: despite receiving enormous attention they 'are not an asset class' claims the blue chip global investment banking giant and thus cannot be categorised as equities, bonds or a money market.
All the marketing hype in the world cannot disguise that a step-change in how to deal with cryptocurrencies is urgently required. My buddy in the capital's New Town, who asked to remain anonymous and would not elaborate on how he was tricked, agreed. Offering himself up as a salutary warning: 'If a seasoned financier like myself can be duped by scammers, then anyone can fall foul of such double dealing. Rather than digital gold, it's more like a golden age for crypto coin fraudsters'. His best piece of advice in this age of the internet: 'Ca canny out there'.