Commercial banks may create digital currencies to rival Bitcoin, the virtual money whose U.S. dollar value collapsed by 46 percent in 24 hours last month, the head of New Zealand’s banking lobby said today.
Banks noticed the low cost of international Bitcoin transfers, and some may look to introduce competitors as a cap on issuance constrains the digital currency’s supply, Kirk Hope, chief executive officer of the New Zealand Bankers’ Association, said according to the e-mailed transcript of an interview with TVNZ television.
“If it’s not Bitcoin it might be some other type of digital currency that could come into play,” Hope said. The cap on Bitcoin issuance, which limits supply to about 21 million units, “doesn’t mean that some other player couldn’t come into the market, and, you know, that might be a bank.”
Created four years ago by a person or group using the name Satoshi Nakamoto, Bitcoin is a virtual currency that can be used to buy and sell a broad range of items -- from cupcakes to electronics to illegal narcotics. The surge in a Bitcoin’s value has made millionaires out of people who loaded up on them early on, many of them self-described libertarians drawn by the idea of a currency that exists outside government control.
Berkshire Hathaway Inc., the investment company founded by Warren Buffett, hadn’t moved any of its $49 billion in assets into Bitcoins, the New York Times reported May 5, citing Buffett’s comments at the company’s annual shareholder meeting in Omaha.
The currency still faces problems around legitimacy, Hope said. “They are being used to buy things like arms and drugs,” he said. “I suspect tax isn’t being paid on Bitcoin transactions.”