The Intercontinental Exchange, which owns the New York Stock Exchange, has been developing an online trading platform that will allow large investors to buy and hold bitcoin. The plan, along with commodity exchanges now offering bitcoin futures, signals a shift from the financial industry’s pervasive mistrust of cryptocurrencies to a cautious entry into mainstream adoption.
Dragan Boscovic, an Arizona State University computer science research professor and director of the Blockchain Research Lab, gave ASU Now some insight into bitcoin’s latest step toward legitimacy.
Question: After years of skepticism about cryptocurrencies, what is motivating the New York Stock Exchange to develop its own trading platform?
Answer: Cryptocurrencies, while relatively new, are about a decade old now — within the normal cycle for any new technology to gain some traction. What we have seen over the past few years is that original cryptocurrencies like bitcoin did produce some additional platforms and networks that do not necessarily have the same objective as currencies tied to a country or consortium of countries.
The industry now sees an opportunity to offer a new asset for trade, broadening choices for investors.
Q: What will bitcoin look like on the NYSE?
A: Traders have been looking into cryptocurrencies for some time now. From the investment perspective, cryptocurrency is considered an asset and as such, it is traded as a commodity. Just like we trade precious metals like gold or silver or platinum, we can look at cryptocurrencies in the same way. In other words, the NYSE now looks at cryptocurrency as an investment option in the same way it treats gold as a commodity.
Why now? I think it’s because people are now more familiar with bitcoin.
Video by Jamie Ell/ASU Now
Q: What does this mean for the consumer?
A: Consumers now will have another choice. In addition to investing in assets like gold or land, now they can invest in an intangible asset that has an accompanying proof of ownership. The vulnerability of a digital currency is based on demand, and it is not open to influence by additional supply. A government can bootstrap an economy by introducing a new supply of traditional currency to influence borrowing. That can’t happen with cryptocurrency.
Q: How would these transactions work?
A: In the same way you buy any commodity on the stock exchange, you will be able to buy digital currencies like bitcoin, Ethereum or Dash.
Q: Does bitcoin’s acceptance open the door to other cryptocurrencies?
A: Certainly. The trading or acceptance of bitcoin will open the door to other currencies. It’s a very positive development in the sense that it injects confidence into the marketplace. Institutional investors are recognizing this new asset as a valued investment opportunity; this will encourage individual investors. It will also encourage consumers and small shops to start trading in cryptocurrency.
Q: Why have institutions been so resistant to cryptocurrencies in the past?
A: I wouldn’t call it resistance but rather inertia and maybe time to understand how it works and what does it mean to any business or operation. I think self-preservation is natural behavior for both humans and institutional organizations and bodies.
It takes courage and curiosity to understand how this new thing would impact their business. It’s essentially doing business in a new way. When institutions saw the long-term value in doing business this way, they became much more embracing and started to adopt technology for optimizing their internal processes and making them more efficient to audit.
The acceptance of cryptocurrencies and the blockchain platforms on which they exist is evolutionary more than revolutionary.
Q: Does the NYSE give this some legitimacy for consumer confidence?
A: It’s an encouraging development. Consumers do develop confidence when they see a large institution such as the stock exchange backing and selling cryptocurrencies.
Q: Will cryptocurrency ever be commonplace?
A: I believe cryptocurrency will be one asset that will feed and provide fuel for a new economy. We will still continue to trade in gold, silver and platinum. It’s simply another trading asset.