Digital currencies go mainstream

MARY REICHARD, HOST: It’s Thursday, the 4th of March, 2021.

This is The World and Everything in It and we’re so glad to have you along today. Good morning, I’m Mary Reichard.

MEGAN BASHAM, HOST: And I’m Megan Basham. First up: digital currencies.

The idea for electronic money first surfaced in a paper published in the wake of the 2008 financial crisis. That’s when nearly 500 banks failed and Americans lost $10 trillion. The paper’s author, Satoshi Nakamoto, said financial institutions can’t always be trusted. And he posed what seemed then like a futuristic solution: What if consumers could cut out the middleman and pay each other directly, bypassing banks and government regulators?

REICHARD: A year later, Nakamoto released the first cryptocurrency to the public. You’ve probably heard of it. It’s called Bitcoin. Since then, dozens of other cryptocurrencies have popped up. But Bitcoin is still the most valuable. For several years, it floated in the back alleys of the Internet. But increasingly it’s hitting Main Street. WORLD’s Sarah Schweinsberg reports.

SARAH SCHWEINSBERG, REPORTER: Kurt Ward has a PhD in kinesiology. But he enjoys dabbling in investments on the side. He first heard about Bitcoin seven years ago. He thought about buying some, but… 

WARD: I went, looked it up. And like, yeah, that’s a little sketchy.

Sketchy because it was so new. Ward didn’t know if a coin would hold its value or if the technology behind it really worked.

But that didn’t quench his interest. He kept researching and watched as Bitcoin and other digital currencies grew in value and popularity. In 2017, Ward bought in. 

WARD: A small portion of Bitcoin, Litecoin, and some Ethereum.

And he’s glad he did. Last year, cryptocurrency’s aggregate worth grew 300 percent. 

WARD: Just through trading, basically, since August, I’ve tripled what I’ve put in.

Ward says the longer Bitcoin and other digital currencies stick around the more comfortable people like him are getting with them. 

WARD: I think it’s becoming more mainstream, easier to access.

A January 2020 survey found a third of U.S. small businesses now accept some digital currencies for payment. Bitcoin debit cards convert the currency’s value into dollars, allowing purchases and ATMs withdrawals.  

Big box names like Whole Foods, Overstock, and AT&T also accept Bitcoin. Car company Tesla, recently purchased $1.5 billion dollars worth of the currency and will also accept it as payment. 

Financial institutions are jumping in too. Paypal lets users buy and hold Bitcoin on its platform. Massachusetts Mutual Life Insurance recently bought $100 million dollars worth of it. Some Wall Street investors are also buying it up. 

And pressure from employees is pushing banks like JP Morgan and Goldman Sachs to consider investing. 

So what do businesses see in Bitcoin that they didn’t see before?

Glen Goodman is the author of The Crypto Trader. He says financial institutions are buying Bitcoin as a hedge against inflation in uncertain financial times. 

GOODMAN: Bitcoin’s become hugely popular in recent times, I think, largely due to the fact that Coronavirus, set off a situation where the Federal Reserve felt that it needed to create huge amounts of new money in order to try and buoy up the economy while everybody was in lockdown. By printing huge amounts of money, they scared a lot of investors and made them think, Oh no, you’re devaluing the dollar, and we need a harder currency. And originally, they started turning to gold and the price of gold was rising. But then a lot of investors started turning to Bitcoin and saying Bitcoin is a hard currency like gold, because it has a very limited supply.

Bitcoin’s mathematical algorithm will only allow 21 million coins to ever exist. So like gold, it has a limited supply.  

Right now computers have mined 18 and a half million coins. Mining is the process of high-powered computers solving complex math puzzles to create new Bitcoins. 

This limited supply also means investors don’t want to miss out on the opportunity to buy in and make money. 

GOODMAN: The fact that you just can’t print it in endless quantities, like you can with national currencies. That, arguably, is what makes Bitcoin the most attractive cryptocurrency and why its prices are soaring.

Bitcoin also attracts customers because it’s decentralized. That means it isn’t controlled by a government or a bank. It’s regulated by Bitcoin users who all have to use compatible software. 

But it does have downsides. Joel Griffith is a financial regulations scholar at The Heritage Foundation. He says Bitcoin’s biggest problem is its volatility. In February Bitcoin reached its highest value ever, then plummeted 21 percent in a week. 

GRIFFITH: With the dollar, it depreciates in value almost every year. But with Bitcoin, you have very wide fluctuations. And that can happen in the course of a day. 

There’s another risk. So far, Bitcoin and other digital currencies have evaded government regulation. But that could come to an end. Treasury Secretary Janet Yellen says they allow criminals to finance terrorism and drug traffickers to launder money. 

Author Glen Goodman says the federal government could also step in if Bitcoin keeps growing. 

GOODMAN: It’s already worth a trillion dollars. If it becomes more and more powerful, and starts to threaten the dollar’s position as the global reserve currency, then the Treasury Secretary and the, the SEC and other regulators may decide to really clamp down on Bitcoin and that will have a massive impact on Bitcoin if they did that.

While Bitcoin’s future may be uncertain, Glen Goodman says cryptocurrencies in some form are here to stay. 

GOODMAN: There will still be loads of cryptocurrencies. Bitcoin, I suspect will now stay around because of all the companies and financial institutions that are investing in it and giving it strength, but we still can’t guarantee that the Bitcoin will hang around for the long term.

Reporting for WORLD, I’m Sarah Schweinsberg.

(AP Photo/Kin Cheung, File) In this Dec. 21, 2017 file photo, a Bitcoin logo is shown is displayed on an ATM in Hong Kong, Thursday, Dec. 21, 2017. 

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