‘It would be nonsense to lump all cryptocurrencies together’

Ivo Arnold says this is a bubble. Do you agree?

“It’s chaotic for sure – particularly when you look at the Initial Coin Offerings that have kept popping up since early 2017. All sorts of people are attracted by the promise of getting rich very quickly. At which point they’re basically asking to be duped. You saw exactly the same thing with the public offering of World Online, when everyone thought that anything Internet-related would turn into gold. But we need to distinguish between, occasionally worthless, cryptocurrencies – which were basically dreamt up to score a quick buck – and currencies like Bitcoin, which are based on a very solid and revolutionary transaction technology: blockchain.”

It’s pure speculation, according to Arnold. This Bitcoin doesn’t represent any underlying assets.

“Nonsense. When you buy a Bitcoin, you buy a share in the global blockchain technology: a worldwide, consensus-based decentralised transaction system. The Ripple, another major cryptocurrency, is already used by banks to settle their correspondent accounts. Before this, banks relied – and still rely – on very expensive SWIFT-based systems.”

A lot of people still don’t understand exactly what kind of impact blockchain will have. How are you so sure that this technology will spark off a revolution?

“This revolution is already going on. Just consider: 15 October 2008 saw the collapse of Lehman Brothers, which unsettled the entire world of finance in its wake. Two weeks later, Satoshi Nakamoto published the famous paper about a transaction system that was no longer dependent on a central party like a bank. Within less than a year, this concept was developed into the blockchain system, which can serve as a base for bitcoin. Simply dismissing bitcoin as a hype that is mainly supported by speculators and criminals betrays a complete misunderstanding of the underlying technology. And this is borne out by its reception by institutional players: this week Rabobank launched its own bitcoin wallet: Rabobit.”

Could you offer an example of a possible practical application of blockchain?

“One case that I always find interesting myself is the Dutch persoonsgebonden budget (a ‘personal budget’ used to buy healthcare services). Some 6 billion euros per year are put into this scheme, via a very complicated system, which moreover is susceptible to fraud. That’s one area where you could really put this technology to good use. Introduce some kind of Care Coin, and thanks to blockchain, you gain insight at any given time into who has been provided with which specific services.”

For the time being, the cryptocurrency market is still tremendously volatile. In the course of one month, Bitcoin dropped to half its previous value. Hardly a stable system, wouldn’t you say?

“It’s not true that it lost 50% of its value. It’s true: the number of dollars or euros that you get for a given amount has decreased. But as long as I can pay you with Bitcoin, Ripple or Ethereum, it’s not that big a deal. And the same applies to something like that Care Coin I mentioned earlier: there’s no cause for concern as long as it’s used by a restricted community. Its value in euro only becomes a point when you want to use that Care Coin or Bitcoin to buy a loaf of bread, for example, from a bakery that only accepts euros.”

How do you expect this development to play out from here?

“I’ve been working in technology long enough to know that it’s best to be modest when asked to make any kind of long-term prediction. But if I had to venture a guess, I expect to see a substantial increase in blockchain-based cryptocurrencies that are exclusively accepted within a specific community. The Care Coin, the Erasmus Coin. In many cases, these tokens won’t be freely marketable – just like you wouldn’t buy or sell Albert Heijn trading stamps or Air Miles. And over the next five years, we can expect banks to jump into this gap to provide the required liquid assets for these tokens.”

Regulators like the Netherlands Authority for the Financial Markets (AFM) don’t always know what to do with cryptocurrencies. What would you advise them?

“Try to gain a basic understanding of blockchain and set to work on it as soon as possible – by introducing one of those Care Coins, for example. Try to make it clear to the public that a transaction technology like this has a lot of potential, but that it isn’t the same thing as trading in cryptocurrencies in some ‘get rich quick’ scheme.”