Monday

23rd Sep 2019

Interview

Bitcoin: Virtual currency gets boost from eurozone troubles

  • Bitcoin's value has soared in the past month (Photo: Zach Copley)

The eurozone crisis and its latest Cyprus episode has led to a boost in the value of an Internet-based currency known as bitcoin, with Finns now the largest per capita users.

One bitcoin was trading at over €100 on Wednesday (3 April), a tenfold increase compared to only three months ago.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

The hike happened largely during the month of March, when the small island of Cyprus - a tax haven and banking hub for Russian oligarchs - shut down its banks for two weeks while negotiating the terms of a bailout which led to the restructuring of its two largest lenders and the imposition of capital controls.

But bitcoin's gain is not only due to Cyprus' pain, says Jon Matonis, the board director of Bitcoin Foundation - an outfit promoting the virtual currency.

"The story is mostly perpetrated by the media, but I don't share the view that the bitcoin price rise stems from Cyprus. It's a great business case for bitcoin, but in fact there are very few bitcoin users in Cyprus," Matonis told this website.

Created by an anonymous programmer or group of programmers, bitcoin is not linked to any central bank or government, as it is issued by computers all over the world when solving complex mathematical problems.

Matonis says that "apart from the problems in Europe," the price of a bitcoin has risen because investors who want to put their money into businesses related to the virtual currency can only do so by buying up bitcoins.

As the number of bitcoins is limited to 21 million - due to the finite number of possible mathematical problems - and half of them are already in use, their scarcity also drives up the price, Matonis explains.

As for why bitcoin remains unchallenged as a virtual currency, Matonis said that in his 15 years of experience with digital currencies, he observed that the other currencies always are linked to a company, a country or a government which can ultimately "shut you down."

"Bitcoin is peer-to-peer, there is no way to shut it down. It is like bit torrents [allowing movies and music to be shared among computers all over the world], but for money," he explained.

However, with the financial crisis, the euro crisis, and now the latest attempt to tax small depositors in Cyprus, Matonis says "there is absolutely a link" between people losing faith in the traditional currencies, banks and central banks and bitcoin's increased popularity.

"Banks nowadays don't do many things to gain the favour of their customers. Basically both banks and central banks make the case for bitcoin."

Among bitcoin users, Germans rank third worldwide after Americans and Russians, says Matonis. Spaniards, Italians and Dutch are also large groups of users. But in per capita terms, Finns are top.

Security issues related to bitcoin are not higher than when using online banking or storing gold in a vault that can be cracked open by robbers, Matonis said.

Still a geeky product, bitcoin is easy to download, but the transactions have to be made more "user-friendly," he added.

Asked if he keeps his savings in bitcoins, he answered: "Partly yes. Unfortunately some of it is still in euro."

Criminals prefer virtual currencies

Criminals are using bitcoins and other unregulated digital currencies as a payment method of choice when blackmailing companies following a data breach.

France urges EU virtual currency rules amid Libra risk

France has urged the EU to introduce a framework for the regulation of cryptocurrencies, after the introduction of the new Facebook virtual money 'Libra' threatens the financial stability of the EU.

Opinion

Europe is lacking tech leadership

Despite some 'unicorns', Europe lags way behind the US in tech innovation - and is in danger of being overtaken by China, whilst preoccupied by the online threat from Russia. The EU needs to back France's Macron's new thinking.

News in Brief

  1. German bank fined for cheating Danish tax system
  2. Supreme Court ruling on Johnson on Tuesday
  3. 10 arrests over possible Catalonia anniversary attacks
  4. 53% of Europeans think LGTBI discrimination is widespread
  5. Doubt cast on new Maltese inquiry into slain reporter
  6. March by Slovak Catholics seeks abortion ban
  7. 600,000 stranded on holiday as Thomas Cook collapses
  8. Egypt: hundreds of protesters arrested over weekend

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  2. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  3. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  4. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  5. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  6. Nordic Council of MinistersNo evidence that social media are harmful to young people
  7. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  8. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  9. Nordic Council of MinistersEducation gets refugees into work
  10. Counter BalanceSign the petition to help reform the EU’s Bank
  11. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  12. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness

Join EUobserver

Support quality EU news

Join us