They’ll Hate It Until They Love It: Bitcoin

bitcoin economy

Zug’s cobblestone streets and a 15th Century clock doesn’t exactly scream innovation. But hundreds of companies have flocked to the municipality in Switzerland.

Its corporate tax rate is among the lowest in Switzerland. And in May 2015, Zug mayor, Dolfi Mueller, sat down with fellow councillors to discuss what role they could play in the cryptocurrency revolution.

Burgeoning Bitcoin Economy

Today, Zug houses the headquarters of Bitcoin Suisse. Its 20-plus employees work from an apartment filled with screens tracking bitcoin prices.

Many other crypto start-ups have flocked to Zug due to its acceptance of digital coins and low corporate tax rate. The founder of one such company is Niklas Nikolajsen.

He moved his bitcoin business to Zug in 2013. By 2015, his company was trading 13 million Swiss francs in annual volume. Today, it’s closer to 300 million francs a month. That, he says, makes him an indispensable cog in the burgeoning bitcoin economy.

But even though cryptocurrencies are gaining popularity the world over, there are still just a handful of places like Zug — encouraging cryptocurrencies to thrive.

According to Bloomberg, UBS chief, Sergio Ermotti, said the world’s wealthiest are yet to warm up to cryptocurrencies:

People are more curious than really willing to invest…I don’t think there’s any meaningful desire by high net worth individuals to take big bets on this kind of phenomenon.

Even the Nasdaq is keeping cryptocurrencies at an arm’s length. Nasdaq chief, Adena Friedman is particularly worried that ‘there is no standard for disclosure…there are no protections for investors.

Still Sceptical of ICOs

At the moment, many are still sceptical of initial coin offerings (ICOs). This is when crypto founders create their own digital currency and float it on an exchange. It’s just like an initial public offering (IPO), but for cryptocurrencies.

ICOs lack the same regulation and standards as IPOs. It’s allowed a few bad apples to raise capital through ICOs and run off with the cash.

It would shock me if you don’t see pump-and-dump schemes in the initial coin offering space,’ SEC Chairman Jay Clayton said last month.

I believe many will shun cryptocurrencies at first. But like many banks, they will eventually realise the potential of bitcoin and blockchain technology.

As Bloomberg columnist, Hugh Son, explains:

At first, bitcoin was a way to make payments without banks. Now, with more than $100 billion stashed in digital currencies, banks are debating whether and how to get in on the action.

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein tweeted Tuesday that his firm is examining the cryptocurrency. Other global investment banks are looking into facilitating trades of bitcoin and other cryptocurrencies, according to industry consultants.

Want to learn how to buy bitcoin before the bankers pile hundreds of millions into the digital token? Click here.

Cheers,

Härje Ronngard,

Junior Analyst, Money Morning

Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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