Susan Wood interviews Kirk Hope
Susan Wood interviews Kirk
Hope
The CEO of the New Zealand Bankers’
Association Kirk Hope told TVNZ’s Q+A programme that a
decentralised digital currency like Bitcoin could present
problems for Governments.
Bitcoins can be used to
buy and sell items anonymously online.
“That’s
one of the challenges, I think, for governments. We’ve got
some anti- money laundering legislation coming in to force
here on the 30th of June. Bitcoins are untraceable,
virtually, and they are being used to buy things like arms
and drugs, so those types of activities can lead themselves
to the types of things that governments are trying to
prevent.”
The digital currency also means
governments and banks are cut out of financial transactions,
which is of concern to bankers.
“Well, I think
one of the interesting things about Bitcoin is that it is a
cheap way to transfer funds internationally, and that’s
one of the things that have been picked up.”
Kirk
Hope isn’t ruling out banks becoming involved if digital
currencies like Bitcoin were to take off.
“Only to the
extent that electronic currency overtook, you know, normal
currency, and actually the issuance of normal currency has
been rising, so they’re making more money off the
seinorage, the issue. What I’d say probably is that if
it’s not Bitcoin it might be some other type of digital
currency that could come into play because Bitcoin’s
capped out at 21 million Bitcoins, if you like. That’s the
maximum amount that can ever be on issue, we understand. But
that doesn’t mean that some other player couldn’t come
into the market, and, you know, that might be a
bank.”
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Q+A
SUSAN
WOOD INTERVIEWS KIRK HOPE
SUSAN
WOOD
Ever heard of Bitcoins? If the answer’s
no, you are not alone. They are the equivalent of digital
gold - a completely decentralised digital currency that can
been used to buy and sell items anonymously online. And
therein lies one of the problems - Bitcoins can be used to
buy drugs, weapons or pornography, and anything else,
really, and they cannot be traced. And that is worrying
governments and the banks, who are being cut out of the
financial loop. But will Bitcoins or some other digital
currency eventually overtake dollars and cents? Kirk Hope is
CEO of the New Zealand Bankers Association. Good
morning.
KIRK HOPE, CEO, New Zealand
Bankers
Association
Morning.
SUSAN
So what are
Bitcoins?
KIRK
Well, they’re a new type of digital currency. We’ve seen
different types of digital currency before, I mean, linden
money in Second Life. Everyone’s heard of Second Life, I
think. And so this is just a new form of this type of
currency. As you said in the outline, the issue with it is
that it is an unregulated currency. It’s capped, we
understand, at around 21 million Bitcoins, so what that
means is that when people are buying and selling the
currency it can have quite a high level of
volatility.
SUSAN
It’s already had that, hasn’t it? $20, $250 to $150, I
think, since
February.
KIRK
And it maxed out at $300. So one of the challenges with
digital currency, or, sorry, electronic currency is what
happens- For example, there was a case in the States where a
man lost $7000 Bitcoins, which at that point was the
equivalent of $1 million.
SUSAN How did
he lose them? You don’t drop them in the
street.
KIRK
His computer crashed. It’s as simple as that. So one of
the challenges with this form of currency is how you hold on
to it. Some other examples where fraud takes place - so, you
know, you might lose your money card or something like that.
This can happen with Bitcoins as well. So you have a thing
called an Instawallet. With the Instawallet, it’s an
electronic wallet. Lots of people who are trading Bitcoins
had their Instawallets hacked, so they lost their currency.
SUSAN How do
you get hold of
Bitcoins?
KIRK
So it’s a peer to peer network, right? It’s very much
like BitTorrent, which is a file-sharing system. So it works
pretty much like that. So you have a network, you download a
piece of software and then you go and create Bitcoins
through an
algorithm.
SUSAN
But you’re paying real cash for these
Bitcoins?
KIRK
No, what you do is you log on to the network and the faster
your computer, the quicker you can get Bitcoins. So what you
find there also is that you have hackers coming in to expand
the power of their computer by using other people’s
computers to create more
Bitcoins.
SUSAN
Sounds almost like an online game, to some
extent.
KIRK
Well, I think that’s one of the reasons why it’s been
quite popular, because it does sit outside, you know, it is
a little bit like a
game.
SUSAN Also
very easy to use for illegal activity, because they are
untraceable, so, you know, pornography, drugs, weapons,
whatever you wanted
to.
KIRK
Absolutely, and that’s one of the challenges, I think, for
governments. We’ve got some anti money laundering
legislation coming in to force here on the 30th of June.
Bitcoins are untraceable, virtually, and they are being used
to buy things like arms and drugs, so those types of
activities can lead themselves to the types of things that
governments are trying to prevent.
SUSAN On the
counter of that, though, some legitimate businesses are
accepting them, aren’t they? You can buy a cup of coffee
with Bitcoins in some
places.
KIRK
Except you wouldn’t want to pay $300 bucks for your cup of
coffee.
SUSAN
No, you would not. How concerned are the banks about this?
Are they
worried?
KIRK
Well, I think one of the interesting things about Bitcoin is
that it is a cheap way to transfer funds internationally,
and that’s one of the things that have been picked
up.
SUSAN Yes,
because it cuts out those foreign exchange transactions
which you guys make a lot of money on.
KIRK Of
course, but I think the point about that is that the
volatility and the value of Bitcoins has meant that if you
start your transaction at this point in time and then 10
hours later your transaction’s completed, what might have
happened in the interim is that the value of the Bitcoin has
changed quite significantly. So you’ve either underpaid or
overpaid for the goods. So that’s another challenge for
Bitcoins.
SUSAN
Of course, the control also, I believe 80% of it controlled
out of one registry or exchange in Japan, which is
unregulated, isn’t
it?
KIRK
Yeah, that’s right. It’s all unregulated. That’s
right.
SUSAN
We’ve seen the volatility. We also see the Reserve Bank
making $200 million bucks a year printing the cold hard
currency. If these electronic currencies were to take off,
they’d lose that income.
KIRK
Only to the extent that electronic currency overtook, you
know, normal currency, and actually the issuance of normal
currency has been rising, so they’re making more money off
the seinorage, the issue. What I’d say probably is that if
it’s not Bitcoin it might be some other type of digital
currency that could come into play because Bitcoin’s
capped out at 21 million Bitcoins, if you like. That’s the
maximum amount that can ever be on issue, we understand. But
that doesn’t mean that some other player couldn’t come
into the market, and, you know, that might be a
bank.
SUSAN Oh
really? So that is something the banks are now looking
at?
KIRK
No, well, what I’m saying is that it could be any
participant in a payment
system.
SUSAN So
it doesn’t necessarily have to be some shady- Because this
is pretty shady. We’ve got a name, we don’t actually
even know who created these things. Who knows? Is this the
way of the future? Will we all have electronic wallets and
not be carrying round the cold hard cash, in a different
sort of currency? In an international currency like this, if
you like?
KIRK
Well, I think we’re already seeing a little bit of that
with the move to mobile payments. Much quicker, simpler
faster transaction mechanisms. And we are seeing a big move
to wallets in those forms. So I think the answer is
inevitably
yes.
SUSAN
There’s a real appeal, I think, from the punter’s point
of view that you’re not paying transaction fees, you’re
not paying foreign exchange fees. If the banks were to get
involved, how would they make their money on things like
this?
KIRK
Well, exactly in the same way that they’re making money
off mobile payments and mobile payment systems. So it’ll
be very very low value and very low value transactions, so
still very competitive.
SUSAN IRD - I
mean, this is a good way to cut the IRD out of the loop.
They must be concerned too.
KIRK
I’d imagine, because I think they’ve said that you
should treat these transactions like a foreign currency
transaction, and they are taxable. I suspect tax isn’t
being paid on Bitcoin transactions, to be
honest.
SUSAN
You would think not.
KIRK
No.
SUSAN All
right, so a matter of watching this space. If not Bitcoins,
well, there will be other players in this, won’t there?
We’ve seen some, and they’ll continue to turn
up.
KIRK I
suspect so,
yeah.
ENDS