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Bitcoin boss urges cautious investment

Llew ClaasenImage copyright
TED

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Bitcoin Foundation’s Llew Claasen sees huge potential for crypto-currency in Africa

The head of the Bitcoin Foundation, Llew Claasen, has urged people to invest “no more than they can afford” in the crypto-currency.

He was speaking at the TEDGlobal conference in Tanzania about the potential for Bitcoin in Africa.

Billions lack access to formal banking, but the uptake of mobile money means many are willing to embrace alternatives.

Bitcoin had been adopted in Nigeria, South Africa and Kenya, he said.

The digital currency had particular resonance in countries with volatile economies, he said.

“It offers people a chance to protect their savings from government abuse of monetary policy.

“A lot of people in Zimbabwe are interested in it as an alternative financial system, but that is not an easy thing to do formally as we don’t want to be perceived as wanting to disrupt economies,” he told the BBC.

Small businesses

The Washington-based Bitcoin Foundation is a non-profit organisation that promotes the use of Bitcoin around the world.

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Bitcoin reached a peak price against the US dollar in late August

Like other crypto-currencies, it relies on a digital technology called the blockchain – a decentralised digital ledger that records every transaction.

The tokenisation of crypto-currency – in which the rights to an asset are converted into a digital token on a blockchain – could also have a big impact on Africa, Mr Claasen said.

“It means a small business owner can tokenise shares in his business so investors do not have to go through a central intermediary or register their shares.”

That would make it easier for investors to both put money in and take it out of businesses, he added.

Mr Claasen admitted that, in its current form, Bitcoin was not great as an alternative to cash.

But, he said, a forthcoming network upgrade would make low-cost transactions on the mobile network easier.

“Currently the network has a transactional input of three to four transactions per second, which isn’t great if you want to use it as cash.

“But once the upgrade goes live, effectively there will be no limit to the transactions the network can handle.”

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Efforts are being made to allow more Bitcoin transactions to be processed at once

That upgrade is due in the next six to 12 months.

Bitcoin recently hit an all-time high, with the value of one bitcoin soaring to about $4,500 (£3,470).

But Mr Claasen sounded a note of caution, urging people not to invest “more than they can afford”.

“To be honest Bitcoin is not a great form of cash right now. Don’t think of it as cash, think of it as a digital form of gold that enables you to save outside of the current financial climate,” he said.

He blamed the currency’s recent volatility of the currency on “unsophisticated investors”.

“They read an article about it which may or may not be true and make decisions about its long-term future, and that is why we have extreme swings,” he said.

But in a decade’s time, he said, everyone would have “two wallets”, one reflecting local currency and one with a variety of crypto-currencies.

He dismissed worries that the currency, because of its anonymous nature, could be used for tax evasion and money-laundering.

He pointed to a European Union report this summer that suggested that its potential for criminal activity had been overblown.

“It found that there was not a lot of large-scale criminal behaviour,” he said.

“Bitcoin is not completely anonymous and it is fairly easy for someone, say a revenue officer, to work backwards to find who was responsible for a transaction.”

Bitcoin boss urges cautious investment

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