War on Cash – France planning ‘anti cash’ capital controls – Q3 2015

From Joseph Salerno via Mises Institute,

  • “Prohibiting  French residents from making cash payments of more than 1,000 euros, down from the current limit of  3,000 euros.
  • Given the parlous state of the stagnating French economy the limit for foreign tourists on currency payments will remain higher, at 10,000 euros down from the current limit of 15,000 euros.
  • The threshold below which a French resident is  free to convert euros into other currencies without having to show an identity card will be slashed from the current level of 8,000 euros to 1,000 euros.
  • In addition any cash deposit or withdrawal of more than 10,000 euros during a single month will be reported to the French anti-fraud and money laundering agency Tracfin.
  • French authorities will also have to be notified of any freight transfers within the EU exceeding 10,000 euros, including checks, pre-paid cards, or gold.”

Read more @ Zerohedge.com….

War on cash – Greek Government proposes ‘Tax on Withdrawals’

From Zerohedge:

“The Greek government is now proposing to instate a tax on withdrawals from ATM’s in the country and aims to raise 180M EUR in additional fees due to this measure. This is clearly aimed at containing the current ‘soft’ bank run that’s going on in the country. Additionally, all wire transfers of in excess of 1,000 EUR will also be subject to the tax”

“With this idea, Greece is effectively introducing a capital control in the country, and it obviously would not do that if the situation didn’t demand for drastic measures to be taken”

Read more….


China Announcements V Bitcoin price – And why investors should look at the bigger picture

In the last few months, there is no doubt that many in the Bitcoin investment space are getting weary of the constant threats emanating out of China and the PBOC with relation to Bitcoin regulation. In particular with how Bitcoin exchanges and financial services can operate within China.

In fact whilst many investors obviously want China and the Chinese citizens to participate in the Bitcoin economy, especially due to the high trading volume they bring to the market. They are now looking to the Chinese government to officially state their position regardless of what it is, to try and underline the ambiguity surrounding their regulatory stance.

The goal of this? To end the uncertainty which has plagued the bitcoin price over the last 5 months (which we will look at shortly). This has no doubt played a part in frightening away the weaker hands which helped fuel Bitcoin’s $1000+ move back in November 2013.

Whilst there is no definitive answer or evidence as to why there has been so much ambiguity and uncertainty regarding China’s official stance on Bitcoin regulation. Possibilities discussed range from a lack of understanding on the part of regulators grappling with this new technology, to deliberate manipulation in order to lower the bitcoin price.

So what has been the effect of the announcements on the bitcoin price? And should current or potential investors really fear the regulatory stance of China?

The effect of the announcements:

The following charts show the price drop following Chinese regulatory announcements/rhetoric from the beginning of the announcement to the end of the short term down trend.

Dec 5th: Peoples bank of China Starts rhetoric on restricting financial institutions from handling Bitcoin, issues statement Baidu and China Telecom stop accepting Bitcoin

Price drops $1130 to $540 – 52% drop.

China Price drop December 5th 1130-540

Dec 16th:  China’s payment processors told not to deal with Bitcoin.

Price drops $857 to $381 – 55% drop.

China price drop December 16th 857-381

Mar 28th: Rumours of new China bank restrictions.

Price drops $570- $339 – 40% drop.

China price drop Mar 28th 570-339

April 25 2013: – PBOC further restrictions Bitcoin exchanges, restricting Bitcoin transactions through rechargeable funding codes.

Price drops $500 – $438 – 12.5% drop (currently)

China drop April 25th 500-438



Chinese price drop summary table

Whilst you have to take into account other factors such as profit taking, technical weakness, momentum trading and the Mt.Gox affair over this 6 month consolidation period. It is clear that these Chinese announcements have had a profound effect upon the drop in the bitcoin price.

But looking at the summary, the effect of these announcements appears to be diminishing as bitcoins move into stronger hands and new investors enter the market looking for bitcoins that are potentially offering a discount under fair market value.

The Bigger picture:

For people currently invested or looking to invest in bitcoin, it is important to remember that Bitcoin is a lot bigger than any one country, even if that country is one of the biggest players on the world stage.

It could and has been argued that Bitcoin is one of the biggest and most important technological innovations in human history and the likelihood of it going away anytime soon, could be conceived as being very low. Whilst bitcoin remains a speculative high risk investment in the near term, it is worth bearing this in mind.

In addition to this, regardless of China, there are approx 200 sovereign states in the world not all of which are taking such a hard stance towards Bitcoin regulation.

These states cumulatively have tens of trillions in wealth currently located in stock markets, pensions, savings accounts, bonds, forex and commodities. Not to mention the wealth in offshore accounts that some estimate to be around $21 trillion.

If even a small percentage of this money makes its way into the Bitcoin market, it is not difficult to conceive a bitcoin price many multiples of its current $5-6 billion market cap.

It is also worth remembering that bitcoin is a global currency. As such, the opportunity for regulatory arbitrage ensures that there will always likely be a state that recognises the value of Bitcoin and are open and willing to cooperate with Bitcoin entrepreneurs, exchanges and start-ups to help build a robust Bitcoin economy. Evidence of this is the growing amount of Venture capital (VC) moving into the Bitcoin space, which is estimated to total approx $500 million by the end of 2014. A number almost in line with the rate of VC the internet attracted during its early stages.

It is these states that will likely force the hand of the more reluctant states in the long term, as they enjoy the competitive advantage that comes from a growing Bitcoin economy that benefits from the use of an efficient, low cost, frictionless transaction network.


Whilst it is likely beneficial to take note of any regulatory moves from individual states that affect the bitcoin price, when making an investment decision to enter of leave the market. It is always worth bearing in mind the bigger picture of Bitcoin as a whole and why the underlying fundamentals perhaps offer an opportunity much greater than can be affected by any individual state.




The Elephant in the room – Rising Sovereign Debts, Rising Interest rates

It’s been over 5 years since the epic events of 2008 that should have marked the end of the runaway fiat currency, debt saturated global economy which we have been thrown into by a combination of loose regulation and easy credit that was willingly administered by the quote, ‘too big to fail banks’.

However, since 2008 it is fair to say there has been no real fundamental reform of economic policy, banking regulation and the very nature of the institutions that brought us to our knees. As a result UK debt levels continue to escalate.

In addition to this there has also been no real evolution in the mainstream media’s (MSM) coverage and rhetoric on the fundamental reasons and critical state of sovereign debt levels.

In particular how the need to maintain low interest rates on these debts, make any chance of a genuine recovery a near impossibility.

Despite all the talk of recovery and ‘green shoots’ in the economy that I hear on a daily basis, backed up by the pseudo backdrop of record high equity markets, bond markets and a propped up housing market still benefiting from artificially low interest rates. It is still evident that sovereign debt levels mostly inherited by past bank bailouts and servicing of interest on that debt are growing worldwide and are predicted to grow further throughout 2014.

G7 Soverign Debt levels

Of course the chart above only shows sovereign debt, when corporate, financial sector, private debt and unfunded liabilities are factored in, the debt to GDP in the UK is estimated to be around 900% GDP.

G10 Debt DistributionThe UK’s approach to this crisis (as well as many other countries globally) has led them to quantitative easing (QE).  This is essentially money printing where the central bank (BOE) monetizes debt through the purchase of government bonds (Gilts) from other financial entities such as banks and corporations. The two main objectives of this is supposed to keep interest rate low by creating artificial demand for gilts and to stimulate growth by funding SME’s.

However, it could be argued that the very same forces designed to stimulate growth are actually undermining the real economy at the same time as the increase in base currency through QE and fractional reserve banking is causing asset price inflation in essential commodities.

This in turn not only drives up living costs and reduces disposable income for large parts of the population, but has the knock on effect of damaging businesses due to reduced demand, leading to layoffs that create an excess of labor and dropping wages.

What we have ended up with is a catch 22 situation that is not being widely discussed in the MSM. The very steps to try and resolve the crisis is undermining the real economy by driving up total sovereign debt which almost ensures the need for even more debasement of the currency through QE in the future, to roll over maturing debt and the interest on the sovereign debt.

This in turn will again lead to more inflation and the erosion of purchasing power of fiat currencies including the pound, creating a dangerous negative feedback loop in the economy.

With sovereign debt approaching £1.4 trillion and what looks like a reversal of the gilt bond market into a secular bear market in May of 2013, signaling rising interest rates on Index linked bonds and new gilt purchases.

The opportunity for the government to make and meaningful reduction on the UK’s sovereign debt to a sustainable level, is looking more and more insurmountable.


Is the Fed’s Taper about to reveal Fiat currency systems are doomed

It could be argued the only reason there has been any strength and investment in the emerging markets and the reason most of the developed world have not posted double digit negative GDP figures since 2008, has been the unprecedented market interventions by the Central banks worldwide. They have essentially acted as a backstop for the global economy with policies such as the ongoing Quantitative Easing (QE).

In the process, trillions have been added to sovereign, corporate and private debt worldwide and the expected growth from all of this intervention has not materialised. This was again recently highlighted by the massive ISM manufacturing index miss in the US.

As central banks and government intervene in the free markets, with unprecedented sovereign bond purchases and distressed asset purchases such as Retail Mortgage Backed Securities (RMBS).

They have created a Ponzi like scheme where only continued purchases of these assets in greater numbers, will continue to support the mark to market pricing of these assets on the balance sheet of the central banks and major financial institutions worldwide.

In the US especially, sovereign debt has accelerated since 2008 up to $17.3 trillion. It has now hit levels that require even greater issuance of treasury bonds annually, in order to roll over maturing debt, interest on the existing debt and to keep interest rates low to prevent default.

The fed has provided the artificial demand for these bonds and now owns 30-40% of the Treasury bond market.

However, the danger of this has now been exposed, with the recent move by the  Federal Reserve to taper back on QE from $85 billion to $65 billion on monthly purchases.

Just a 23% reduction in monthly QE purchases has led to capital flight from emerging markets. On top of this it has led to capital rotation in domestic markets as the DOW, S&P 500, NASDAQ  and Russell 2000 as well as global indices begin to accelerate losses, as investors begin to see the backstop for the economy and these markets as a whole taken away.

With major indices slipping under their 200 day MA’s, there is now concern of even bigger losses and the emergence of a bear market in equities.

Major problem:

All of this from a 23% taper is further showing how the Fed’s actions now in large determine the future outcome of the global economy and this is the biggest danger of the attempted taper.

If the Federal Reserve reverses the taper in the near future in an attempt to appease global market selloff’s and contagion, it will highlight more than ever that they simply cannot stop the monetisation of debt to support the global economy and the inevitability of the demise of the dollar and other fiat currencies in their current state, will be further exposed.

This could well and truly lead to the expected fiat currency collapses as people lose all faith in this global fiat Ponzi system and will potentially move us closer to the long expected capital rotation into finite asset’s such as precious metal’s crypto currencies and other commodities.




Retail investors not big money may fuel the next Bitcoin rise – Here’s why:

There is always a lot of discussion and speculation in various Bitcoin forums trying to figure out when big institutional money such as hedge funds and major private equity groups are going to start moving into the Bitcoin space.

The reasons for this are obvious. These funds command trillions in wealth worldwide and even speculative positions from these players could have a major effect on the price and market cap of bitcoin.

However, it could be retail investors and smaller investment groups that fuel the next price rise ahead of major institutional money. This article will take a look at why the market may not be ready yet for big institutional towards the end, but first let’s look at why retail investors may be set to enter the market.

Retail Investors:

Having worked at a major UK brokerage in 2013 as an investment consultant, I spent every day consulting with retail investors which provided me with a great insight into their investing behaviour.

From my experience here are some of the reasons I believe they may soon look to invest in the Bitcoin market.

Brokerages offer a huge amount of Funds and Multi Manager Funds (funds that invest in other funds) they are an extremely popular investment vehicle for retail investors. The reason they are so popular is because many retail investors are very passive by nature, this is partly contributed to by the fact that many have full time jobs and in many cases they don’t have the time or interest to carry out in-depth research on many individual investments. It provides them with exposure to multiple types of investments, through one low maintenance security that is professionally managed for a small premium.

During the last bull run in Bitcoin during Q4 2013, there were no secondary market Bitcoin funds for retail investors, but this looks set to change towards Q3 and Q4 of 2014.

CEO Barry Silbert of SecondMarket Holdings, Inc, the company that set up the Bitcoin Investment Trust (BIT), have indicated that they are looking to expand the scope of their operations to make funds available for retail investors hopefully by Q4 this year.

In addition to this the Winklevoss twins are also well into the process of getting approval for their ‘Winklevoss Bitcoin Trust’ an exchange traded fund (ETF) which looks like it will list on the NASDAQ. Whilst it’s difficult to estimate when the regulatory process will be completed for the ETF, many commentators believe it could be finalised by Q4 2014 if not by early 2015.

The creation of these funds may help usher in a new wave of retail investment and the successful completion of the funds may be a catalyst for the creation of more Bitcoin secondary market funds in the future.

Confirmation of a trend:

The fact is the majority of retail investors always wait for the confirmation of a trend before investing, as retail investors by their nature are more risk averse less and less likely to be part of the ‘smart money’ that invests early in high risk investments.

Whilst Bitcoin is without a doubt still a high risk speculative investment, it has now been around for 5 ½ years and the Bitcoin economy continues to mature every day. With another potential move back above $1000 as many analysts are predicting in 2014, this may give the confidence that retail investors need to enter the market.

There are only so many times you can declare an asset is dead, after a price correction, before seeing it go to new highs to provide retail investors with the confidence they need to enter the market.

High Bitcoin price:

Whilst I have heard arguments from some early bitcoin investors that a higher bitcoin price may deter retail investors as the thought of spending 4 figures on a single bitcoin may not seem attractive. There are many reasons why this may not be the case.

One reason as we discussed earlier is to do with the secondary market funds. For example whilst a $1000 bitcoin price seems expensive for a single bitcoin, investing $2000 in a ETF and receiving 100 shares may sound more attractive than buying 2 single bitcoins.

Along the same lines, the proposal of changing the pricing of bitcoin to ‘Millibits’ (mBTC), may have the same psychological affect. For example buying 1,500 mBTC for $1500 may sound more appealing to a retail investor than purchasing 1.5 BTC.

Main Stream Media coverage:

During the late 2013 run up in the bitcoin price, there is one correlation I really noticed whilst working as an Investment Consultant that led me to believe that retail investors are much more reliant upon mainstream media (MSM) for their investment decisions.  

It was not until the price started to reach $1000 dollars that we started to get multiple enquires of  how and if  clients were able to invest in Bitcoin whilst working at the brokerage.

This coincided with growing coverage in the MSM from sites such as CNBC , Bloomberg and Reuters as the price reached this distinct milestone.

The charts below show the google trend searches for ‘Bitcoin’ V the Bitcoin price as it neared and surpassed $1000.

Google trend search V bitcoin price 1000

It could be argued that a move back into the $1000 will likely ignite the MSM coverage again and increase interest from retail investors. Coupled with the fact that many retail investors will be more aware of Bitcoin from the previous spike and may soon have investment vehicles thy can then use to invest. This may lead to an influx of retail capital into the Bitcoin space.

Slowing global equity markets:

2014 has currently seen a significant slowdown in equity market returns globally, compared to recent years. It is these equities that currently make up a large percentage of many investment Funds and Multi Manager funds offered by major brokerages.

Whilst it is extremely difficult to gauge the future direction of the markets, due to massive market distortions from the likes of the Federal reserve through QE and their Permanent Open Market Operations (POMO). The decline in macroeconomic data and the appearance of tapering of these tools has currently led to weaker equity markets in 2014.

If this trend continues and ROI continues to lag for equities, we may see much more interest from retail invest towards Bitcoin. The reason for this is that during my time working as an Investment Consultant I noticed that  retail investors in many cases use 4 main metrics when looking for an investment fund.

  • Past price
  • Current Price
  • Historical Yield (Past performance of the security)
  • Distribution yield (Total interest likely to be paid to you, by the fund divided by the fund’s value)

If these metrics start to decline for equity heavy weighted funds and the Bitcoin market continues its growth trend. We could potentially see a lot of money move out of these funds into Bitcoin specific funds (and or) other funds start to weight their portfolios to include Bitcoin funds (dependant on fund remit & regulation).


Whilst there are many potential variables to all the points above, there are a lot of reasons why retail investment may soon come into the Bitcoin space and help fuel the next possible upside move in Bitcoin.

A move back above $1000 and new secondary market funds would definitely be a great catalyst to start the process and this could lead to a much higher bitcoin price and market capitalisation.

The reason this is important is because this is of the main pre-requisites and incentives big institutional money like hedge funds and major private equity groups need to get involved in the market.

Reggie Middleton of ‘Boom Bust Blog’ recently highlighted this in one of his tweets:

In addition to this, without liquidity it is extremely difficult for big players to move in and out of the market without dramatically affecting the buy and sell price. Executing a bid or ask price in the tens of millions on any of the current main exchanges, would take out a huge amount of bids and asks in the order book. This would lead to a much higher buy price or much lower sell price when trying to execute a trade.

However, improved liquidity coupled with improved infrastructure, and derivative products for hedging could see the big institutional money start to invest in bitcoin and that could potentially take us closer to the much anticipated S-Curve adoption in the future.


I do not have any affiliations with the funds/products mentioned in this article. This article should not be viewed as an endorsement of the funds/products discussed. Please carry out your own extensive research before considering investing in any funds/products mentioned in this article.

How Merchants can reap the benefits of Bitcoin adoption

Regardless of a merchants underlying ideological stance towards Bitcoin, there are many reasons why acceptance of Bitcoin through merchant processors such as ‘Bitpay’ and ‘Coinbase’, can provide both value for the merchant and increase the value of the underlying Bitcoin network as a whole in a relatively low risk way.

The basic understanding of ‘value’ is the regard that something is held to deserve; the importance, worth, or usefulness of something.

Simply by accepting Bitcoin as a method of payment, merchants are recognising the ‘value’ that Bitcoin can provide in many ways:

Benefits for merchants:

1) It opens up businesses to a wider market audience and pool of capital. The bitcoin market cap has seen highs of $14 billion and is projected by many analysts to be many multiples of this in the future. On top of this the user base for Bitcoin looks to be growing at an ever increasing rate.

2) It lowers their transaction costs for purchases with Bitcoin by 50%-66% based on a <= 1% transaction fee (volume dependant) compared to in the region of 2%-3% charged by debit card and Credit card companies.

3) Time is money – It saves merchants time on the processing of transactions. Please see my article Bitcon V UK Retail Banking for an example of how much time Bitcoin transactions can save.

4) Being at the forefront of Bitcoin adoption, merchants have opportunities for free advertising and media coverage not only in the mainstream media, but also in the alternate media and on social media platforms.

5) Merchants that adopt bitcoin for payments are seen as pioneering, trendy and in touch with the digital age, to a growing technologically orientated populace.

6) Many merchants have benefited from the support and passion of the Bitcoin community, that have been very supportive of companies that accept bitcoin. A good example of this is Overstock.com where Patrick Byrne CEO recently reported $1.6 million in bitcoin sales and states that bitcoin purchases are growing by 25% a month.

How does Bitcoin and the Bitcoin network benefit from merchant adoption:

1) It adds to the services and products that can be purchased using Bitcoin, thus increasing the ‘utility’ of the currency which is a major attribute that provides Bitcoin with value.

2) In the case of EuroPac Precious metals, Bitcoin gains from the perception of having a highly respected investor and public figure accepting payments in bitcoin. This increases its validity in the eyes of sceptics and people less informed on Bitcoin as a whole.

3) With every merchant acceptance of Bitcoin, it makes it more desirable purchase the currency because of increased utility and boosts the network effect that increases the chances of Bitcoin reaching large adoption.

4) The ‘Amount of transactions’ on the Bitcoin network is an important metric in analysing the health of the Bitcoin economy and one of the indicators used for potential investment. Increased merchant adoption will likely have the same effect on the amount of transactions.

5) Companies that accept bitcoin payments have the potential to create margin compression for other companies in the same industry, as reduced transaction fees enable savings to be passed onto consumers. This creates an incentive for all other companies in the same sector to adopt Bitcoin to stay competitive. This has the potential to create a snowball effect of facilitating Bitcoin payments within many industries.


The important thing to look at here for all merchants and investors looking to adopt or invest in Bitcoin, is the underlying symbiotic relationship where both the merchants and the value of the Bitcoin network benefit from the adoption of Bitcoin by merchants.

One of the biggest criticisms I hear at the moment is the fact that merchants are not really supporting Bitcoin, or do not see the value of Bitcoin if they immediately convert back into fiat currency. But as we have seen above, there are a lot more factors to consider than just the currency conversion.

For me the conversion back into Fiat currency when adopting Bitcoin represents ‘Phase 1’ of merchant acceptance and companies like ‘BitPay’ and ‘Coinbase’ provide a good way to hedge against current price volatility that is undoubtedly present in the market and will be for the foreseeable future.

As Bitcoin matures leading to a possible increase in market cap and reduced volatility, this could potentially lead to ‘Phase 2’ where merchants begin to reduce the percentage of Bitcoin they convert back into fiat currency.  

We have already began to see this at Overstock.com as CEO Patrick Byrne recently stated, they are now holding onto 10% of all Bitcoin transactions in Bitcoin.

‘Phase 2’ also has the possibility to alleviate the potential  impact of another talked about problem, that converting Bitcoin transactions straight to fiat currency puts sell side pressure on the exchanges.

If you like Bitcoin or not, every merchant can find value by accepting bitcoin and by looking at the points above, everyone in the Bitcoin space can potentially benefit from increased merchant adoption. There is also a good case to be made that those merchants that do act early will potentially see the biggest amount of benefits and gains by accepting Bitcoin at this relatively early stage.

For further information and an in-depth look on the topic of Bitcoin and value, I highly recommend this excellent article:  ‘Do Bitcoins hold intrinsic value, or are they overvalued’


Product Disclaimer

Bitcoin V UK Retail Banking – David and Goliath

For centuries banks have provided a medium for the facilitation of financial transactions domestically and internationally. During this time they have provided a necessary service that has helped facilitate the growth of domestic and global commerce.

However in the last century especially, it could be argued that the financial services sector has become growingly complacent with archaic infrastructure, considerable fees and a severe deterioration in integrity and trust.

The lack of serious competition may have fostered this complacency, however, this all changed with the creation of Bitcoin in 2009. There is no doubt that globally banks are very worried about the competition that Bitcoin offers and for good reason. Bitcoin has the potential to massively disrupt their privileged position as financial/transaction intermediaries that net them billions in commissions and fees every year.

However, if bitcoin is to grow into a mass adopted currency, it needs to provide retail users with utility and benefits that go above and beyond the current banking system that currently handles the vast majority of transactions.

With a recent study showing that UK consumers are still very sceptical about Bitcoin, now may be a good time to look at this in more detail.

This article aims to take a closer look at how Bitcoin compares in cost, speed and availability against other transaction methods used in retail banking in the UK. But before we look at the intricacies, there are two major benefits that Bitcoin can potentially offers over the current banking system, that I think need special attention:

Reduced Counterparty risk:

It is no secret that due to fractional reserve banking (FRB), banks have rehypothecated thier tier 1 capital multiple times in the UK, much of which has made its way into risk assets.  This brings into question if banks actually have the collateral available to back all the bank deposits currently sitting on their balance sheets. In the event of one or more major sovereign defaults and the likely ensuing contagion, it is not difficult to envisage a scenario where the mark to market losses on these risk assets would render one if not more of these institutions insolvent.

In an event like this, bitcoin potentially offers a safe haven (similar to physical precious metals) of having an investment without any counterparty risk to the highly leveraged current financial system. Whilst counterparty risk can come from holding bitcoins in third party companies such as exchanges like Mt.Gox. This risk can be mitigated with various hot and cold storage techniques that can greatly reduce or almost eliminate this risk altogether.

Protection from devaluation of fiat currency:

Around the world, the continuing and accelerating debasement of fiat currencies through FRB and Quantitative Easing (monetisation of sovereign bonds) has accelerated, especially since the financial crisis of 2008 and the bank bailouts that ensued. In the UK currently £375 billion has been pumped into the monetary system by the BOE and the real world effects of this can be seen with asset price inflation creating price rises in fuel, energy, utilities, travel, tuition, house price and rents. The result of this, simply by holding your money in GBP, people’s purchasing power continues to decrease as low interest rates cannot offset losses from a higher rate of inflation.

On the other hand, as a currency, bitcoin has a set limit of 21 million units. Whilst bitcoin remains inflationary as bitcoins are rewarded through the mining process, the inflation rate is very slow and as a result, devalued fiat currencies continue to fall in value against bitcoin. One of the major advantages of this is that bitcoin holders possibly have the opportunity to protect their purchasing power from more aggressive devaluation.

Having looked at two of the major benefits that Bitcoin could provide going forward, let’s take a closer look at this comparison.

The following information takes a look at how Bitcoin compares against a standard infrastructure and fee structure of a large UK retail bank account. It will look at the most widely used transactional methods used BACS, BACS faster payments, CHAPS and SWIFT, in terms of cost, speed, availability and limitations for Domestic and international payments. A list of all financial institutions that use these methods can be viewed here.

The information collected is publicly available information from one major high street bank in the UK. Whilst other banks may differ slightly in there fees structure this information should provide a fairly reliable benchmark across the main players in the industry.

Before we review this information, it is worth taking into account that the Bitcoin protocol and bitcoin market factors are changing all the time, so the scope of this information is to give a realistic snap shot in time of what the Bitcoin can potentially offer. Depending on adoption and growth of the bitcoin network these factors are likely to change going forward.

Domestic transactions:

Domestic payment UK retail banks and Bitcoin

(Click for larger image)

At the moment, it is possible to make fee free domestic transactions in the UK through BACS and BACS faster payments with a retail bank deposit account up to the value of around £25,000. A full break down of faster payment limits can be viewed here.

For clients sending money between the institutions where faster payments are available, this service actually provides a fairly good cost effective way of sending money domestically in the UK.

It is worth noting that Bitcoin transactions can be made without a fee, but the fastest transaction confirmation time of 10 minutes cannot be guaranteed. More detailed information on Bitcoin transaction fees can be found here.

Whilst this undercuts the current recommended miner fee of around 0.01 mBTC to help ensure a 10 min transaction using Bitcoin. It could be argued that it is the speed and availability that will make Bitcoin a viable competitor for smaller domestic payments. Further adoption of bitcoin and increased transaction volume could potentially reduce this fee in the future, which would help make micro and small transactions more cost effective in a domestic scenario.

One area where Bitcoin clearly offers an advantage is with large, time sensitive transactions that make up the bulk of CHAPS payments in the UK. Bitcoin can clearly undercut the speed, availability and average £30 fee charge for this service which is used mainly for payments that are normally above the BACS and BACS faster payment limitations.

Making International Transactions:

Internatonal transactions uk retail banks - Bitcoin

(Click for larger image)

As the Bitcoin protocol and bitcoin currency can be used globally, the advantages of sending international payments are a lot more clear when compared to the most commonly used method of SWIFT, currently used by the banking system. The process of sending money internationally is the same process as sending domestically when using bitcoin in terms of cost, speed and availability. SWIFT on the other hand, as you can see from above, has a lot more disadvantage’s against Bitcoin in terms of:

  • Cost (especially for smaller transactions),
  • Availability (limited to working days),
  • Transaction limits (£75,000 online)
  • Speed perhaps most importantly the time for the transaction to clear. At best transactions clear in 2-4 days, but depending on the geographical region of the receiving financial intermediary this can sometimes be as much as 12 days.

In addition to this, a widely discussed major benefit of Bitcoin is that it provides a low entry transactional network that opens up commerce for billions of people who are currently unbanked around the world, for reasons that range from geopolitical, to the lack of banking infrastructure in there geographical region. With bitcoin something as simple as a cell phone can be used to transfer bitcoins internationally.

Receiving an International transaction:

Receiving international payments

(Click for larger image) 

Another cost that can be mitigated by Bitcoin altogether is when receiving international payments. Whilst the percentage cost is fairly low for large transactions. When receiving international payments through a retail bank account in the UK, it is the more common smaller payments that incur a noteworthy transaction fee on a cost % basis.

Other bank fees that could be avoided through the use of Bitcoin:

Other fees avoided uk retail banking


Time is Money:

Having looked at the difference in transaction speeds across Bitcoin, BACS, BACS – FP, and CHAPS, we can now look at the total time that could potentially be saved per annum, using Bitcoin, based on the amount of transactions for each method and the generally accepted transaction times.

Whilst there are many variables, including transactions that clear before the limits shown below for BACS,BACS FP and CHAPS, as well as Bitcoin transaction confirmations that exceed the 10min 1st confirmation time. The following information I believe shows the potential for time saving when using Bitcoin versus the current banking methods.

The total amount of transactions shown below is taken from the ‘Annual Summary of payment clearing statistics 2013: Inter-bank and Inter-branch Clearings’ available from the UK payments council.

Tranascation times savings bitcoin

(Click for larger image)

Drawing a comparison in overall time saved when using Bitcoin over the current methods of banking transactions, we can see that the potential time saving when using Bitcoin is huge. It’s easy to conceive just how much time could potentially be saved in the UK alone with the reduced time in waiting for transactions to clear and how this can accelerate the speed in which domestic and global commerce can take place.

Whilst the Bitcoin protocol is currently capped at 7 transactions per second with artificial limits to prevent major growth of the Blockchain, before the network is ready for it. These limits can be removed and the amount of transactions that the network can handle is scalable by many multiples, especially with growing computer power which will help facilitate this.  If the network continues to increase in size and speed, the potential for being able to facilitate the amount of transactions shown above is not inconceivable.


Whilst the UK banking industry still plays a dominating role in facilitating domestic and international transactions in the UK and in some instance, provide a good medium for very low cost transactions. The risks associated with using the banking system in the UK are growing by the day.

Coupled with long transaction times and in some case partial availability, Bitcoin looks set to provide much needed competition in the UK retail banking industry, especially with its low cost for domestic and international payments, fast transaction times and 24/7 availability. In addition, the prospective growing need to hold assets that can be used to hedge against counterparty risk and debasement of fiat currency, could see its adoption grow.

Whilst it is unlikely to replace the banking system in the near term. On a longer time scale, with further development of key services needed for wide adoption. The scalability of the Protocol and network provide a realistic proposition of Bitcoin having a much larger market share of this industry.

Because of this, it is likely we will see a determined effort from these banking institutions and other powerful payment providers to try and slow down and limit the impact of Bitcoin through lobbying, regulation and patent trolling.

After the recent Chinese crackdown in particular on Bitcoin exchanges in China, I discussed this fact with Javier Marti, Bitcoin expert, digital trend analyst and CEO of Bitcoin Global Investments.

During the conversation he stated;

“One of the most important things to look at right now, is who has the most influence over the law makers and what will be the outcome?” 

“The difference may be a future in which Bitcoin comes to mass adoption in the medium term, or one where the process is greatly slowed”.

Whilst Javier remains optimistic about the potential of Bitcoin going forward. This is something that has to be taken into consideration.

Whether you agree with political donations or not, perhaps one of the silver linings for Bitcoin in relation to this, is the recent news that US Politicians can now accept bitcoin donations up to the value of $100, which could lead to similar legislation in other jurisdictions.

The future remains to be seen, but Bitcoin has the potential being one of the greatest examples of lean engineering the financial services industry has ever seen, and the fact that Bitcoin is being backed by a tireless community network of developers, entrepreneurs, investors, business minds, journalists and enthusiasts, may help it face up to these head winds.

In addition, with the possibility of extreme tail risk in the banking industry, it is possible the adoption of Bitcoin in the future may go from being a ‘want’ to a ‘need’.





Russia & Bitcoin – Growing proof that Bitcoin is bigger than any one country

As I previously stated in my article ‘China V Bitcoin prices – Why investors should look at the bigger picture’:

“For people currently invested or looking to invest in bitcoin, it is important to remember that Bitcoin is a lot bigger than any one country, even if that country is one of the biggest players on the world stage.”

“It is also worth remembering that bitcoin is a global currency. As such, the opportunity for regulatory arbitrage ensures that there will always likely be a state that recognises the value of Bitcoin and are open and willing to cooperate with Bitcoin entrepreneurs, exchanges and start-ups to help build a robust Bitcoin economy”

“It is these states that will likely force the hand of the more reluctant states in the long term, as they enjoy the competitive advantage that comes from a growing Bitcoin economy that benefits from the use of an efficient, low cost, frictionless transaction network”

We began to see proof of this today when Bank of Russia deputy chairman Georgy Luntovsky indicated a loosening in the central banks stance on Bitcoin and Cryptocurrencies:

“At this stage we need to watch how the situation develops with these kinds of currencies. These instruments should not be rejected,”

Andrey Ostroukh from the WSJ reports:

“Russian authorities have softened their tone on Bitcoin; the central bank now says it won’t hamper the usage of the virtual currency whereas previously it had vowed to crack down on the electronic payment instrument.
The Bank of Russia is now accumulating information about so-called crypto-currencies and is not blocking Bitcoin, the central bank’s first deputy chairman Georgy Luntovsky said Wednesday”

While is waits to be seen if Russian authorities follow through fully on the back of this rhetoric, what is perhaps of significant value here is the speed in which the stance has changed from the beginning of the year.

This may have been contributed to by the rapid speed of developments in the Bitcoin space, especially in regards to its growing legitimacy. We have recently seen the first large and mid-cap companies begin to adopt Bitcoin as a payment method ( DISH, Expedia, Newegg) and many other large cap companies have stated there interest.

In addition to this, recent US sanctions against Russia as well as perceived overreach by a prominent US bank could have possibly been taken as another warning that Russia may need a more diverse set of tools to facilitate international trade in the future.  This will only be compounded as the existing global financial system becomes more unstable and trust between major powers (especially the US) continues to deteriorate.

It will be interesting to see in the near future if this reversal in rhetoric from a superpower like Russia, creates further announcements from governments that have so far been more hardline inclined towards Bitcoin and Cryptocurrencies as a whole.


Why an IBM/Central Bank Blockchain system wont stop the surge in Bitcoin adoption

Ever since Bitcoins dramatic conception and explosion in popularity following the 2008 financial crisis; it would be a safe bet to assume that financial incumbents worldwide have had all there top think tanks planning on how they can marginalise, undermine, circumnavigate and prevent one of the biggest black swans in global finance for centuries from coming to fruition.

Bitcoin having previously been ignored & laughed at looks to be reassuringly into the ‘fight you’ stage, as an anonymous source allegedly linked to IBM has revealed this week:

Reuters Reports:

 “The company has been in informal discussions about a blockchain-tied cash system with a number of central banks, including the U.S. Federal Reserve, the source said. If central banks approve the concept, IBM will build the secure and scalable infrastructure for the project”

“Unlike bitcoin, where the network is decentralized and there is no overseer, the proposed digital currency system would be controlled by central banks, the source said”

Whilst we don’t yet know the full details or validity of these statements; if they are true, a system of this nature (whilst potentially offering some advantages for traditional currencies) goes completely against the fundamental ideology of the Bitcoin protocol as an open source, decentralised, trust free network.

In my opinion, it would not be unfair to interpret this as an attempt by central banks to bootleg the underlying technology of Bitcoin, whilst trying to remain completely in control of the global financial system and monetary policy; which has caused unprecedented mal investment bubbles in recent times.

Whilst on the surface this is likely to be perceived as increased competition for Bitcoin ( and rightly so). There are a lot of reasons why a system of this nature may not be able to stop the surge in Bitcoin adoption. Here’s why:

1) Trust – Any closed proprietary system removes one of the cornerstone attributes of the open source Bitcoin network & currency, which is the universal trust of the network. The fact that Bitcoin is not controlled by any sovereign state or banking entities is one if not ‘its’ killer attribute that provides the network with tremendous potential value and utility.

2) Surveillance/politicised system – Point 1 is exacerbated by the loss of confidence in the US and the US tech industry since the Snowden NSA revelations and the use of back door surveillance in US technology. In addition, nations outside the US are not going to jump at using a new SWIFT’esq system at a time when they are becoming increasingly aware of SWIFT’s ability to be used as a political tool/leverage with regards to geopolitical events such as international sanctions. A  great example of this is China’s recent completion of a SWIFT alternative.

3) Innovation – Open source networks such as Bitcoin and the internet create a free market environment that encourages large scale innovation by removing prerequisites for participation in the development of services and Businesses that sit on the network. The result of this is large scale & rapid innovation. A closed proprietary walled garden system such as the one rumoured by IBM could potentially lack the ability to compete with the rapid innovative progression of the Bitcoin economy and infrastructure.

4) Confidence – in Central banking and governments worldwide is on the verge of being decimated. Years of promises that QE would benefit the wider real economy are failing, with evidence of massively deteriorating global macro-economic data in 2015, led by the United States.

During the next recession ( which looks to be imminent) there will be no easy policy tools left for the central banks, such as lowering interest rates & there are only so many times you can announce another QE program before losing all credibility. The lessons learned from this monetary experiment could be so egregious and detrimental that people worldwide will be massively sceptical of any monetary system tied to these central institutions in the future.

5) Currency wars – We are currently experiencing an era of large scale & accelerating currency wars worldwide. The race for all fiat indebted currencies to devalue their currencies to relieve debt burden’s and support their global exports has already led to over 20 instances of monetary easing by central banks in 2015 alone.

This trend looks set to continue, as the amount of debt needed to produce additional amounts of GDP growth has led to extreme volatility and risk in Forex markets. In 2015 this has rattled institutional investors and led to billion dollar losses for funds worldwide. In a period of financial turmoil and unpredictable events, investors and individuals will move to currencies without counterparty risk such as bitcoin and precious metals

6) Currency Attributes – Whilst the details are not 100% clear yet on the system reportedly being created by IBM. If the idea of the system is to represent traditional fiat currencies in a tokenised format with an underlying blockchain infrastructure; what will be the attributes of the currencies that operate on this network? Blockchain protocols at their core are monetary systems with unique characteristics that define the desirability of the currency on that specific network/system. Bitcoin is highly desirable because of its finite supply (inflation hedge) low counterparty risk, and open source protocol that provides a level playing field on a global scale.

If the traditional government currencies that are to operate on the new IBM system still have the attributes of current fiat currencies such as: infinite supply (through fractional reserve & QE policies). Are still unpredictable and manipulable due to policy oversight by a few individuals and are on a  trust based closed proprietary system. Then what IBM system will achieve will only be a fraction of what Bitcoin can offer and currently provides. Due to the nature of good money driving out bad, you would still expect in this scenario for capital flows away from this system and into bitcoin.

7) Time – Bitcoin has already been around for over 6 years and in technology terms that means its potentially nearing the tipping point of ‘S-curve’ adoption. The point where adoption becomes an exponential curve. This happens on average approximately 4-7 years after the technology is created.

S-Curve adoption

(click to see larger image)

The longer it takes for IBM’s system to come to fruition, the more chance Bitcoin will have already ready reached its critical tipping point for mass adoption.

8) Revolution – With the relentless militarisation of police forces, the use of armed forces domestically and increasing amounts of legislation to clamp down on protesters and belligerents. Protesting what could be argued the most unbalanced and unfair global monetary system in history, is becoming physically dangerous. It is here where Bitcoin could become the digital revolution, a way to peacefully push back, by deleveraging the out of control current financial system, without having to take volleys of rubber bullets and lung fulls of tear gas, if not worse.

As people awaken to the realities of the current monetary system, the anger phase of this awakening is more likely to push people to alternative currencies outside of the current system and away from those controlled by central financial institutions.


Since the first day I invested in Bitcoin there has always been two main fundamental reasons that have driven me to Bitcoin as a currency and store of value.

The 1st is debasement of traditional fiat currencies and 2nd to eliminate counterparty risk to the financial assets that I hold.

If the IBM/central bank blockchain system comes to fruition in the way described by the IBM source, it is difficult so see how this system would compete with these two main fundamental reasons for investing in and holding Bitcoin.

Along with all the other reasons above, there is a lot of hope that Bitcoin will continue to lead the way against competition; to a fairer global financial system in the future.