“The hottest investment in the world today doesn’t exist. It’s Bitcoin.” – Dana Blankenhorn

If you’re interested in your financial future and are remotely concerned about how to manage it, cryptocurrencies are deemed, by some, to be the future of all currency as we know it.

There are, in fact, 831 different cryptocurrencies being actively traded, even more in circulation, and creating a new one is as simple as launching a program. Some cryptocurrencies aim to serve specific industries, like foreign trade or gaming. Others claim technical advantages over Bitcoin, launched in 2009 and still the market leader with a valuation on May 23 of almost $37 billion.

These exciting variations of digital money have taken the world by storm this year, grabbing the headlines in local mainstream media:

The South African Reserve Bank (SARB) has announced that it will start testing a number of regulations related to Bitcoin and other cryptocurrencies within the coming months.  South Africa has been among the slowest of the advanced economies to develop cryptocurrency regulations.  SARB also described plans to carry out research regarding the feasibility of cryptocurrency and block-chain adoption within South Africa.

The announcements come amidst growing acceptance of cryptocurrency technology within South Africa. Michael Jordaan, the former CEO of First National Bank, recently voiced his opinion on the latest surge in popularity of digital currencies, saying that he believes that they will compete with national currencies by as early as 2025.

Also in local news, Pick n Pay recently conducted a successful Bitcoin payment trial at its head office’s canteen store.  News that Pick n Pay was even considering a bitcoin payment option spread like wildfire last week, leading to inaccurate reports that the supermarket chain was rolling out a fully-fledged payment option.

Check out this video: 

Bitcoin at POS with Electrum, Luno and Pick n Pay

According to an interview with BusinessDay, CEO Richard van Rensburg

Told the publication:  “We don’t expect that in the near term accepting bitcoin will unlock any significant new business and we are unlikely to roll out the solution until the payments industry and regulatory authorities have established a framework for managing the risks associated with cryptocurrencies.”

What does this mean for local business owners?  Following Pick ‘n Pay’s successful trial, many may be considering accepting crypto payments themselves in the near future.  Accepting cryptocurrencies could be a good investment, or it could not. With cryptocurrency being young, and the market being volatile, there is no easy answer.  It is with this in mind that we cover a number of pros and cons and offer some friendly (but not professional) advice.

Pros:

  • The cryptocurrency market is still young and many optimistic investors are projecting future prices that would make buying any of the major cryptocurrencies (even at the height of 2017) a good bet.
  • Bitcoin operates on “block-chain” technology, a new way of storing information that uses a distributed ledger system. Bitcoin traders can remain anonymous, and the system is not centralized, which means it is much more difficult to hack into. However, the technology is not infallible, and bitcoin hacks have occurred in the past.
  • One of the most attractive aspects of bitcoin is that it’s not tied to any traditional financial institution or government. While the currency can and does fluctuate, the factors affecting its worth are not centralized to a government or bank.
  • Bitcoin is the most liquid of all the cryptocurrencies. Japan’s decision to start recognizing it as legal tender in April seems to have led directly to the current run-up
  • Cryptocurrency is, despite all its risks, perhaps the most exciting asset of the 21st century. A decentralized digital currency that works on the very interesting and likely here-to-stay block-chain technology.

Cons:

  • Cryptocurrency is inherently volatile, and it’s not backed by legal protections. It is subject to fluctuations in value that can be more sudden than government-backed currency.
  • There’s also uncertainty surrounding the regulatory future of crypto—will governments intervene to limit it? Will caps ever be removed, allowing inflation to occur? Will other cryptocurrencies take over?
  • Although block-chain technology is catching on for its superior security, hacks are still a concern for any digital currency.
  • Bitcoin’s original advantage was its anonymity. But this has been broken. The vice chairman of the Bitcoin Foundation itself was convicted of money laundering in 2015, and law enforcement insists that Bitcoin owners can indeed be traced.
  • It’s Not Real: Bitcoin is a mathematical algorithm. It’s not something you can hold in your hand. Its value is based entirely on your trust in the math, the exchange and the willingness of the market to accept it.
  • Finally, there are scalability issues. Currently, transactions take between 20-40 minutes, which could cause major problems as more transactions take place. Our wi-fi infrastructure continues to strain under the pressure we place on it, and the bitcoin system may have problems scaling on top of that.