Looking beyond the hullabaloo surrounding virtual currency Bitcoin over the past few months, as punters and analysts started questioning the viability and validity of the phenomenon, one has to accept we'll be seeing more of these schemes emerging.
Such is the interest that the European Central Bank released a position paper on virtual currency schemes in October last year. It singles out Bitcoin in a case study, but identifies others, such as World of Warcraft Gold and Facebook Credits, as well as loyalty programmes such as frequent flyer miles as similar mechanisms.
The report looked at the possible systemic impact on price, financial and payment system stability. It concluded that virtual currencies are unlikely to hinder price or currency stability, but that there are potential risks for individuals participating in such schemes. This is because they're not regulated and could result in turmoil and losses, as has been demonstrated in the seeming distortion of Bitcoin markets.
The ECB report also doesn't expect contamination of traditional financial markets if such virtual currency schemes do falter.
Among its final conclusions, which don't ring any major alarm bells, the report states that such schemes do fall within central banks' responsibility due to similarities with payment systems and should therefore be monitored and assessed.
I believe necessity will drive more payment currencies.
Getting any view or comment from the SA Reserve Bank proved fruitless, as were attempts to get comment from local commercial banks.
Sean Riley, MD of local ad-serving start-up Ad Dynamo, which delivers more than a billion ads per month, says facilitating payment is a key challenge the business constantly faces.
"It's definitely interesting to see an alternative currency come into existence. The most entrenched payment vehicle is PayPal, but from an emerging market perspective, it doesn't serve those markets, including Nigeria. I believe necessity will drive more payment currencies," he says.
Share