Interest in Bitcoin Grows on Wall Street

quote:

---

Corporate America is gradually warming to bitcoin.

Amid a slew of deals involving prominent finance and tech companies lie signs that the U.S. business establishment is exploring innovative new enterprise uses for digital currencies. They are making early, tentative bets that the so-called blockchain-ledger technology behind bitcoin might one day transform how banks, businesses and even smart appliances circulate money, assets and sensitive data around the world.

The interest is most evident on Wall Street, where there’s a sense that the bank-dominated, centralized pathways through which international finance passes are long overdue for the kind of Internet-driven cost savings that have affected other industries.

“The price of handling bits [of data]has come down by a factor of 10,000 fold over the last generation; it’s high time that the costs of payments processing fall by a factor of even two,” says former U.S. Treasury Secretary Lawrence H. Summers. “Bitcoin offers the prospect of necessary and important disruption in finance for the benefit of buyers and sellers rather than financiers and middlemen.”

---

quote:

---

Most ordinary consumers remain wary of using an unproven, six-year-old digital currency that many associate with illicit drugs, extreme price fluctuations and security risks. But the talk now is that bitcoin’s potential lies more as a low-profile, back-office phenomenon than as mainstream medium of exchange for buying groceries.

The idea is that blockchain ledgers, which are verified, updated and maintained by a decentralized network of independently owned computers, for the first time let people and businesses trust each other in peer-to-peer online exchanges of assets, money and information. In cutting out intermediating middlemen, the theory goes, this technology could slash costs, cut settlement times and reduce default risks.

“It’s an opportunity for Wall Street to streamline some operations that are pretty antiquated,” says Duncan Niederauer, the former chief executive of the NYSE Euronext, who this week became an adviser to TeraExchange, the first Commodities Futures Trading Commission-regulated bitcoin derivatives platform.

There are still major hurdles to overcome. In addition to the security, criminality and price volatility concerns, it’s not clear that the bitcoin network can be sufficiently scaled up. Total daily bitcoin transactions currently average around $50 million, a tiny sliver of the more than $5 trillion traded in world foreign exchange markets.

However, with regulators in the U.S., U.K. and elsewhere devising digital-currency rules aimed at both protecting users and encouraging innovation, companies are exploring possibilities. It marks a big change from a year ago, when bitcoin was mostly viewed as a fringe idea for computer geeks and libertarian opponents of government-issued currencies.

---