The first ATM machine dispensing Bitcoins is apparently opening this month in Asia. So what exactly is the Bitcoin phenomenon? Variously described as a digital Gold Standard, an internet miracle, a means of conducting illegal transactions, a tulip bubble and much else besides, it is a subject that is irresistibly attractive to the blogosphere.
However, when you add the fact that the founder of the digital currency is known only under the pseudonym Satoshi Nakamoto, the mystery surrounding the whole activity has been enough to dissuade most sensible and honest investors from taking it seriously.
Until now, I have therefore largely ignored it. But John Authers and Tim Harford, after explaining the phenomenon very clearly, conclude that it is time to pay attention. Furthermore, the major private banks and regulatory agencies have started to express serious interest in it.
The Chicago Fed has said that, warts and all, “it represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions or even by governments themselves”. And even the conservative ECB argues that, if it is not Bitcoin, then another virtual currency may soon start to grow extremely rapidly.
In recent weeks, the authorities in Germany, France, China, India and Malaysia have all taken steps to discourage speculation in Bitcoins. So it is time to ask whether we should be worried about the economic consequences of virtual currencies.