Monday

11th Dec 2017

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

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.

Commission wants more centralised eurozone by 2019

EU leaders will discuss at their summit next week the commission's proposals, which include a European Monetary Fund and an EU finance minister - but no eurozone budget, as proposed by French president Emmanuel Macron.

EU blacklists 17 tax havens, avoids sanctions

Finance ministers pointed out 'non-cooperative' entities and set up a second 'grey' list of more than 40 countries that have promised to improve their tax practices.

EU blacklists 17 tax havens, avoids sanctions

Finance ministers pointed out 'non-cooperative' entities and set up a second 'grey' list of more than 40 countries that have promised to improve their tax practices.

Stakeholders' Highlights

  1. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  2. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  3. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  4. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  5. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  6. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  7. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  8. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  9. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  10. EPSUEU Blacklist of Tax Havens Is a Sham
  11. EU2017EERole of Culture in Building Cohesive Societies in Europe
  12. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage