Ferhan Patel: Bitcoin and Gold

Bitcoin and gold "are not comparable," or only in the sense that both are means of payment, says Ferhan Patel, a Finetech executive. Gold is universally accepted and can be easily converted to any local currency, explains Ferhan Patel. Bitcoin, he says, is not like that.

Digital currency requires finding someone who can convert it to local currency. The main problem, and the point at which the risk appears, is the question of when it becomes. "If things get tough and I want to convert a bitcoin quickly, exchange it for another currency, assuming the rate is going down, who guarantees that I can convert it at the price I wanted to sell it at?" Patel wonders.

Converting bitcoins to cash takes days, Patel adds. These so-called "transaction points" (known as 'exchanges') will play an important role in the success or failure of bitcoin in the future. Much of the hype surrounding bitcoin stems from the fact that its exchanges are anonymous. Every bitcoin transaction is publicly recorded on the blockchain ledger, a feature that makes the system almost invulnerable. However, the identities behind the account numbers that send and receive bitcoins remain anonymous, a quality that is attractive to criminals. The authorities, however, can still obtain information at these transaction points.

Are cryptocurrencies the money of the future?

"The original idea behind bitcoin was that you can't trace transactions and you have an alternative currency outside of the influence of any central bank. That may have been a bit naive," says Ferhan Patel. "Naturally, it is of vital interest for our entire economic system to gain some control at certain points and to be able to control the money supply. And I think these are the points at which they become traditional money."

With bitcoin gaining acceptance among the public, regulatory interest will also increase. "As soon as bitcoin leaves its own system and enters other economic circuits, the point of risk for criminals appears," says Ferhan Patel. "The public institutions will certainly be there to watch, at least I hope so."

This could also threaten bitcoin's reputation for being safe from inflation. "If confidence in convertibility is lost, that too will collapse," speculates the experienced executive. "As with any other currency, there will be tremendous inflation".