"Bitcoin could be very disruptive to the banks," says Eric Lim, a lecturer in the school of Information Systems, Technology and Management at UNSW Business School. "If banks refuse to connect to such crypto-currency networks, you can see that a large chunk of micro-transactions will happen without banks being involved, and without them getting any profits or control over them."
Bitcoin should be defined as a currency, according to a Senate report released today. It argues that a Tax Office ruling that it is not a regular currency for Goods and Services Tax purposes should be overturned. Instead, the ATO classifies it as an ‘intangible asset’.
“Recent crypto-currency trials at banks such as Westpac and ANZ are a wise way to test the market at a time when crypto-currencies are making the transition from being written off as ‘funny internet money’ to becoming legitimate payment platforms,” he says.
He believes the transparent technology infrastructure behind crypto-currencies makes them a real market force, noting that international money transfers on platforms such as Ripple – a real-time gross settlement system based in the US – can happen in minutes as opposed to weeks when cheques have to be cleared through traditional banking services.
At the core of Bitcoin's success is that it does not require expensive third parties such as banks and payments processors to ensure a transaction is legitimate. Rather, he says “it relies on the blockchain, a digital ledger on computers that run Bitcoin software. All information about Bitcoin transactions is checked against previous entries in the blockchain, providing security against counterfeit bitcoins and illegitimate account holders.”
Lim believes such infrastructure – which operates separately to Bitcoin itself – is one of the inherent benefits that has led to the quick take-up of crypto-currencies.
"Blockchain is the thing that gives Bitcoin its value because it's an open, public, accountable system and people find that it's a very transparent way of transferring bits and pieces of digital information such as bitcoins," Lim says.
For further comment call Eric Lim
on 02 9385 4688,
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