Cryptocurrency’s origins, through Bitcoin’s creation, stemmed out of a feeling of being let down by the financial system in place. 2008 highlighted the weaknesses of the traditional financial system, the bankers, and the housing ecosystem, and thus Bitcoin was born to try and provide an alternative.
Fast forward 10 or so years and Bitcoin has not really lived up to that billing. It has become far more accepted, normalised, and legitimized, but this has happened through the acceptance and adoption of traditional finance of this new FinTech. Bitcoin is primarily used as another speculative asset to trade on.
That is not to say the cryptocurrency space is not building towards something new, but Bitcoin is in danger of being ingrained into how things are done, rather than setting a trend of how things could be done.
The correlation of Bitcoin’s market to the stock market highlights this, its reliance and bending to financial regulations further shows this, and the impact on ongoing traditional financial failures on the crypto space really shines a light on how limited crypto is in the mainstream.
No longer a cypherpunk
Bitcoin was the anarchistic financial workings of the cypherpunks in the early 2010s, but no longer. It has been courting traditional finance and institutional & retail interest, and has mostly achieved this. But, this has brought with it its own set of problems. The recent Wirecard scandal has impacted crypto that is trying to be as mainstream as digital cash.
This week, Wirecard, the German financial technology group, filed for insolvency owing €3.5 billion ($3.9 billion) in one of Europe’s biggest corporate failures and becoming the first company from the DAX 30 to file for insolvency.
This has far-reaching ramifications for a number of businesses and payment processors, but in the cryptocurrency world, the ripples are also being felt. There are a number of crypto-based companies that have lent on Wirecard in the hopes of being used in the mainstream and being legitimized by their name that have now been stung.
Part of this collapse of Wirecard has seen its subsidiary responsible for issuing debit cards, Wirecard Card Solutions Ltd., be suspended by the United Kingdom’s Financial Conduct Authority. And for Crypto card issuer Crypto.com, they now have a lot to deal with.
The CEO of Crypto.com, Kris Marszalek, has however reassured his customers that their funds are secure and are owned by his company. Speaking with Cointelegraph, Marszalek added:
“As of this moment the cards are working fine. As per our statement yesterday (Thursday, June 25), in case of a disruption, we will rapidly proceed to credit the funds back to our users crypto wallets. Given the announcement made by the FCA today (Friday, June 26), this is highly likely.”
Another let down
While collapses like this, that impact other businesses, are part and parcel of corporate life, it is an instance that should not be affecting the cryptocurrency space based on its basic principles. Bitcoin was created to be a new and separate financial system that would be immune to centralized financial failures, but it has not gone to plan.
The balancing act of getting Bitcoin to a point where it can be a powerful tool against the already established financial order, and where it can be used and adopted by a substantial portion of the global population is a fine one.
However, these ongoing failures, with Bitcoin now at the forefront of a new age of financial inclusion, may well be enough to see the cryptocurrency space further distancing itself from traditional, and almost outdated, ways of doing things.
If it can get to a stage where Bitcoin or other cryptocurrencies can prove to be a viable financial system that does not need to rely on traditional providers, then there could be a rapid move towards this system as many people lose patience with the norm.