There is a lot of interest today surrounding cryptocurrencies such as bitcoin and the underlying blockchain technology, including in Zug’s Crypto Valley. However, concerns surrounding security, trust and regulation must be addressed before cryptocurrencies can enter the mainstream world of business.
In September, a Zurich-based technology start-up launched a round of financing in which investors used cryptocurrencies – rather than Swiss francs – to invest in the business. modum.io AG raised the equivalent of USD$13.5 million, according to the company. Investors who participated in the financing received modum tokens (MOD) with voting and profit participation rights.
The emergence of Initial Token Offerings (ITO) – also known as Initial Coin Offerings (ICO) – represents another step in the evolution of cryptocurrencies. Many people have heard of the digital currency bitcoin, first launched in 2009, but few are aware that they can now obtain bitcoins at some ATMs, use them to make payments at certain organisations or even invest in start-ups. And bitcoin is not the only cryptocurrency out there today; others have followed, issued by private firms rather than governments.
Cryptocurrencies, however, have yet to make it in the mainstream business world. Many business and government leaders have expressed conflicting views on the future of these new, fledgling currencies. For example, Jamie Dimon, Chief Executive Officer of JPMorgan Chase & Co., in September called bitcoin a “fraud” that will eventually blow up. In contrast, Christine Lagarde, Managing Director of the International Monetary Fund, has predicted citizens could one day prefer cryptocurrencies.
“I think it may not be wise to dismiss cryptocurrencies,” Lagarde told a Bank of England conference at the end of September. “In many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.”