I write about the financial industry and a couple of week before Christmas I put together this piece below looking at bitcoin, and how paradigms shift: slowly, then all at once.
Early December news in Ireland was dominated by the Brexit talks, and editors trying to get their heads around the complexity of the trade stories were having a hard time illustrating the impasse between Ireland and the UK over the return of a 'hard border' between the countries. The ins and outs of the political dealings are tricky enough to understand, especially as politicians in the north and south of Ireland knew that only some kind of fudged agreement would move things on. Desperate for a picture that might be worth a thousand words, editors dispatched photographers to little-visited border areas.
Soon, Brexit border stories were accompanied by photographs of long-abandoned sentry huts, or European politicians huddled on Irish country roads, pointing into fields. It's hard to photograph something that isn't there.
As it happened, Bitcoin was presenting a similar problem. Editors poring over bitcoin stories, written by some reporter who had started researching it an hour earlier, begged for some decent illustrations to go along with the text. You've probably seen many of these by now. One of my favourites show a real coin with a bitcoin symbol nestled in some wires that suggest the guts of a computer. What is going on here, you might ask: Is this how bitcoins are mined? Photoagencies all over the world, with little knowledge of bitcoin, commissioned photographers and graphic designers to rapidly put together illustrations that could accompany a bitcoin story. Several discovered that bitcoins are mined, and in the last couple of months, it's hard to avoid the photo of miniature figures with pickaxes and kango hammers attacking physical bitcoins. At this level, education is going to take a while.
People are suggesting that we're in the phase of "media awareness". These pictures tell us otherwise. But, like the border, part of the problem is that there's no there there. But there was a bigger problem for the press. Bitcoin was news, so the financial press had to write about it. Within a few weeks, it had decided that bitcoin was bad. That's no shock. Mainstream press and TV outlets are inherently conservative and incline towards the status quo.
Many readers involved in finance globally look to the Financial Times (which publishes the Banker magazine and is closely identified with the industry), and by late November and early December, the FT was kicking bitcoin hard. In the last week of November, it ran its first front-page print headline about the cryptocurrency: "Bitcoin record triggers unease in traditional marketplaces". On 29 November, the FT's Lex team lost its temper and called bitcoin a 'poxy currency', kind of an unusual comment for the paper. Nobel Prize-winning economist Jean Tirole, writing in the paper the following day, explained: "My scepticism does not concern blockchain, the technology behind bitcoin. This distributed ledger technology is a welcome innovation with useful applications, including fast, automatic execution of smart contracts. What worries me are the cryptocurrencies themselves." In the comments section, sentiment ran hard against bitcoin, but was softer towards blockchain.
In fact, the financial media was arriving at the same conclusion banks had reached three years ago: [blockchain good, bitcoin bad]. To be more specific, private blockchains are good. The finance industry was hardly going to contemplate bitcoin itself, which was designed to disintermediate banks. Blockchain though... The R3 project, which started in 2014 and counted 40 global banks among its members - though some including Goldman Sachs and Santander left in 2016 - was one of the first bank blockchain consortiums. Another is UBS's 'Utility Settlement Coin', which includes Deutsche Bank, Santander, Credit Suisse, Barclays, HSBC, MUFG, CIBC and State Street. Then there's the private blockchains developed outside of banks. Chris Larsen, former CEO of P2P lending business Prosper, launched Ripple as a bank-centered blockchain ledger and potential replacement for SWIFT. Ripple trialled its own system with several banks, and ran its own conference in Toronto this year in competition with SIBOS, the conference run by SWIFT. SWIFT is now developing its own blockchain to do the job before some other blockchain gets there. In late December, investors decided they liked the cut of Ripple and it's been racing upwards in price ever since - with some claims that Larsen's personal wealth briefly leapt above uber-rich Mr Zuckerberg.
Blockchain is hot. Countries are trying national blockchains. Spain's Alastria consortium, launched in November 2017, includes Bankia, BBVA, Banco Sabadell, Banco Santander, Cajamar Caja Rural and CaixaBank along with major Spanish utilities and telcos. The initial focus of the consortium will be a digital ID. Smart Dubai Government (SDG) is working to make Dubai the first blockchain-powered government. The initiative won SDG the first place award at the annual Smart Cities Expo and World Congress in Barcelona this October.
Bitcoin goes mainstream
While banks were experiment with private blockchains, the original bitcoin/blockchain was waltzing into mainstream finance - with Zuckerberg's former nemeses the Winklevoss twins leading the charge with full Wall Street friendly preppiness. The Chicago Mercantile Exchange launched its bitcoin futures offering in December, based on the Winklevoss Gemini exchange rates. In November Nasdaq said it will also offer bitcoin futures from the second quarter of 2018. Commentators worried that increased news about bitcoin was going to cause a financial mania, and banks warned consumers against bitcoin, dubbing it a fraud and money-laundering racket, Jamie Dimon most prominent among them. A few bitcoin supporters asked - rather sourly - why the banks had not cautioned with such alacrity about the property bubble. Consumers largely shrugged. They don't believe much that banks say anymore.
At the start of December, I was mildly surprised to hear RTE, the national radio station in Ireland, reporting about bitcoin prices in the morning headlines. Bitcoin, it seemed, was escaping from the financial pages - but it's early days yet, and people already steeped in bitcoin history and technology (and politics) shake their heads at the quality of mainstream reporting on bitcoin and cryptocurrencies. But this story in a way was bigger than the media coverage. Even the FT, which came down on the 'bitcoin is bad' side of the story, was inadvertently helping to grow awareness about cryptocurrencies.
The ECB was clearly worried about bitcoin's arrival in the mainstream. As Reuters reported, the ECB's Yves Mersch told an audience in Rome that banks should implement instant payments quickly, because the "alleged innovation" (as he called it ) of cryptocurrencies was seizing the public narrative. "Banks need to implement instant payments as soon as possible and provide an alternative narrative to the ongoing public debate on the alleged innovation brought by virtual currency schemes", he said. Good luck to the ECB PR person asking newsrooms to stop talking about bitcoin and focus instead on the coming innovation that is instant payments. There are non-technical reasons why instant payments - by which I presume Mr Mersch is talking about interbank transfers rather than card payments - take so long, and centralised control over correspondent banking by a handful of global banks is largely responsible.
I think we'll see a shift in coming months, as reporters begin to get really interested in bitcoin and not just as a new technology, but as a paradigm shift. After that, we might start seeing the media ask some hard questions not of bitcoin but of the financial system that's currently hoping it will all just go away.
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