A Bitcoin for Your ThoughtsBy Shawn Dougherty | September 12, 2013
A while ago, my daughter returned home from a semester of studying abroad in Europe.
She gave me a bag of loose change accumulated during her travels to exchange for U.S. dollars. Planning to use those euros and pounds for my own future business trips to Europe, I sorted through them. One coin in particular — a bitcoin — caught my eye. Never having heard of nor seen such a coin before, I asked her about it. She took it back and told me that an overseas friend gave it to her as a token of their friendship and that people use bitcoins to pay for things on the Internet. That piqued my interest.
A quick Internet search revealed to me that bitcoins are in use as open-source peer-to-peer (P2P) “cryptocurrency.” Users can send bitcoins over the Internet without having to engage a financial institution or other intermediary.
Making its first appearance in 2009, the bitcoin has grown in popularity, though the concept is still foreign to many people. I did locate an article recapping one person’s experience earlier this year trying to live for a week using only bitcoins.
Bitcoin exchange rates can fluctuate significantly. In October 2011, one bitcoin cost $2, whereas in April of this year, it was worth more than $265. Today, according to one bitcoin exchange site, that very same bitcoin would be worth approximately $140. (My daughter’s physical bitcoin is a collectible, but it’s worth real digital bitcoins.)
Two recent bitcoin-related news stories caught my attention. The first was about a federal judge of the Eastern District of Texas who ruled that bitcoins are “a currency or a form of money” (specifically, securities as defined by the federal securities laws). The second was news of Germany recognizing the bitcoin as a legal unit of currency for both purchasing and taxing purposes.
If the use of bitcoin or other cryptocurrency continues to grow, what consequences might there be for commercial and/or personal insurance? That’s just one of the many emerging issues that ISO is monitoring for potential effects on our insurance programs, including our cyber liability program. If you’re a registered ISOnet® user, you can go to ISO’s Emerging Issues web portal, available on ISOnet, to see all of the topics and any recent developments.
I’d offer a bitcoin for your thoughts, but at the current exchange rate, I could go bankrupt quickly. Provide your views anyway — for free — if you’d like.