From left to right: Bob Garrison, DTCC Managing Director and Chief Information Officer and Michael Casey, Senior Advisor to MIT’s Digital Currency Initiative.
When bitcoin exploded onto the scene in 2009, it was hailed by many as the future of currency. However, while adoption of bitcoin technology has steadily risen, it hasn’t turned out to be the overwhelming game changer many predicted.
Those were the sentiments of Michael Casey, Senior Advisor to MIT’s Digital Currency Initiative, during the “Bitcoin and the Digital Currency Revolution” panel at the DTCC Blockchain Symposium.
During the session, Casey and Bob Garrison, DTCC Managing Director and Chief Information Officer, discussed the future of digital currencies and blockchain technology.
Filling a Void
The notion of digital currency had its first foray in businesses some 20 years ago with the likes of DigiCash and CyberCash. The initiatives proved to be unsuccessful as the markets failed to adopt the technology. Fast forward to today. The markets are more receptive to digital currencies and greater opportunity exists for the technology. That is particularly true where digital currencies can fill a vacuum that exists in parts of the world that do not have the infrastructure that more developed economies have, Casey said.
He noted, however, that bitcoin’s adoption has been suppressed by reputational issues. “We all know about the Silk Road and Mt. Gox cases,” he said, referring to the two black eyes bitcoin technology has experienced in recent years. Silk Road was a dark web marketplace that used digital currency and was closed by the FBI in 2013 for its involvement in the drug trade. Mt. Gox was a Tokyo-based bitcoin exchange that crushed investors when it went bankrupt in 2014. “So, it wasn’t hard to see the reason why the adoption of the bitcoin as a means of payment here in the United States hasn’t really taken off. But there is a lot of conversation about the rest of the world, and that’s exactly the place to look.”
Garrison questioned whether countries could introduce their own digital currency. Casey explained that the idea of central bank digital currency, or CBDC, is already real. He noted The Bank of England is looking at digital currency and the Reserve Bank of Australia has talked about a similar concept.
“The very idea that central banks will effectively be positioned in the competition with private banks, which I think is the endgame, is profound."
Issuing its own digital currency puts a country’s central bank in direct competition with commercial banks. “Why would you hand over money to a commercial bank with all the risk that entails without any of the benefits?” Casey asked. “You’re going to have people looking to store short-term custodial funds with a central bank.”
Symposium attendees shared Casey’s opinion, according to an audience poll. When asked “What’s going to drive change in the adoption of bitcoin?” Exactly 40% said government issuance of digital currency while the consumer market came in second with 26%.
“I think a lot of institutions are failing to recognize that there is a pent up consumer demand for some sort of alternative,” Casey said. “What’s also interesting about that, is that what’s driving the demand is the recognition that there is now an alternative with central banks. Bitcoin is that alternative.”
“The very idea that central banks will effectively be positioned in the competition with private banks, which I think is the endgame, is profound,” Casey added.
The discussion closed with a look at the future applications of blockchain technology. Casey said his work at MIT offers insight into the issues and problems companies are trying to resolve through blockchain and digital currencies. He said MIT has had a number of conversations with outside institutions, including private companies, non-governmental organization, and, in many cases, governments.
“They’re coming to us with an incredible array of suggestions,” Casey said. “We are talking about using the blockchain and some sort of digital currency to manage supply chain applications, the distribution of government welfare in a much more transparent way, making charitable payments over the blockchain and creating a one-person, one-vote, locked-in infrastructure, to name just a few.”