Cryptocurrencies such as Bitcoin and Ethereum have been on the periphery of mainstream financial transactions for a long time. This is due to fierce competition from government issued currencies such as the U.S. dollar, the Chinese Yuan, and the Euro. In fact, the total market cap of all cryptocurrencies is less than $100 billion.
However, recently, cryptocurrencies have been growing in popularity, and in public awareness. In fact, a major step forward for cryptocurrencies has just occurred, as Fidelity CEO, Abigail Johnson, publicly announced her support and passion for Bitcoin.
Considering that Fidelity Investments currently manages assets worth roughly $2.13 trillion, it is highly significant that the CEO of one of the largest private companies in the U.S. is declaring strong support for Bitcoin.
Speaking about cryptocurrencies, Johnson said that it is possible that blockchain technologies could come to thrive in the near future, and that these technologies could “complement lots of other innovative areas we see emerging – including, the internet of things and artificial intelligence.”
Johnson also revealed that Fidelity is so enthusiastic about blockchain technology, that it has begun experimenting with Bitcoin micropayments, and has even participated in Ethereum and Bitcoin mining operations. Further she spoke about how Fidelity has partnered with a number of different companies and universities to help promote blockchain technology, and to overcome challenges in the way for cryptocurrencies.
Among the partners Johnson mentioned were Cornell University, MIT, and blockchain startup, Axoni. The fact that Cornell and MIT, two highly reputable universities, are getting involved in cryptocurrencies is encouraging for the blockchain industry.
However, despite the new interest that cryptocurrencies are generating, Johnson has still identified a number of issues that these technologies are facing in their efforts to become more heavily used. These three challenges are regulation, privacy, and scalability.
All of these challenges are strongly linked to control. As Johnson says, “The financial services industry will need to work to understand the risks associated with who controls key features of these systems.”
Cryptocurrencies are designed to be secure and to be protected against certain risks associated with government-issued fiat currencies, such as inflation. However, because financial institutions such as Fidelity could one day be investing hundreds of billions of dollars into cryptocurrencies, understanding who controls the systems and making sure this control is secure is of the highest importance.
Cryptocurrencies are a very new form of currency, so it is not surprising that major players in the financial services industry may have concerns about their regulation and security. However, they are also a very interesting alternative to mainstream currencies, and have the potential to be very appealing to brokerages and investors.
Despite the newness and the current concerns surrounding cryptocurrencies, the fact that people like Abigail Johnson, Chairman and CEO of Fidelity Investments, are starting to demonstrate strong public support for them is very encouraging for their development. Once day, cryptocurrencies like Bitcoin and Ethereum could become an asset class that is a force to be reckoned with, and that is heavily used by financial institutions and enterprises all around the world. However, the challenges identified by Johnson will first have to be dealt with.