Bitcoin interview with Michael Parsons FCA
Having more than 25 years experience in the banking and financial industry; commercially-minded FCA with bank and internet start-up, property development, scientific (Shell Research) and other commercial experience.
Bitcoin Entrepreneur and Advisor.
How did you get involved in BTC?
In April 2012 Bitcoin had an interview with the well known Michael Parsons FCA. When he was asked how he became involved with Bitcoin, his answer came as a surprise.
Recently I read an article where people discussed the fact that people were buying illegal drugs with a currency called Bitcoin! The drugs were not what caught my mind, it was the Bitcoin that did! I always had an interest in alternative ways of exchanging value other than the state-backed fiat currencies.
Starting your research on Bitcoin can be a bit confusing. How can anybody believe that this coin has any chance of success?. This seems to be the scam of a lifetime! Something like this does not seem right. However, a scam is usually planned to the tee, perfect and with no loopholes. It must not appear to the man in the street that there is anything to alert them to the authentication of the project. But this is different!
Although there were a number of things that bothered your mind, you realized that they are in the process of being sorted out.
Does Bitcoin need regulation to be seen as an existing currency?
Michael said his views on this topic can be two-folded. First of all, he said Bitcoin did not regulate or require regulation. Likewise, Apple did not require any regulation to sell digital media through iTunes.
It is sold under existing, rather than specific regulations.
Bitcoin differs from other currencies due to the transfer-of-value mechanism.
The problem lies in the exchange. To exchange without any regulation differs from a bank which is subject to rules and regulations namely KYC “to know your client/ and AML (Anti-money laundering),
If you work with a third party that is not following these regulations, then the bank become exposed, you are now a risk and will be shut down and no bank account opened.
That being a problem in the past. Barclays shut its accounts down with MtGox and Blockchain, resulting in some exchanges to become weak and could not trade as a result.
The solution around that, which is what he had proposed to the UK Government, is that there should be a proper exchange, which handles real currencies that are bound to Bitcoin. You need to have a regulated exchange, with no regulations to comply with.
That will result in regulation under the existing systems for an exchange handling “real world” currencies with Bitcoin.
If this regulation could be implemented, the exchange will be compliant with the KYC/AML regulations. This will keep the banks happy, and it will result in a fully-working exchange.
Thus far no-one has implemented it, except in Canada, where it’s open to Canadian nationals only.
Do you think online currency is incorrectly labeled as the ‘Wild West’ when, in fact, there is a much more professional structure?
When you see the reports of drugs being purchased through BTC, it does not enhance the reputation of the coin. But at the same time, it is a well-known fact that most drugs are paid for with US Dollars.
Cracking down on buying drugs through Bitcoin can be put aside, however, we should rather try cracking down on printing money, which we all realize it won’t be possible.
FT and Sky News interviewed them and it doesn’t necessarily give Bitcoin a good name – although Michael realizes and understand their views.
He said that in the long run, Bitcoin will become more common.
Another thing that is a bother, is a means of payment. Bitcoin is scoring with Internet Payments. Currently, we have to make payments to third parties who are unknown to us.
Making payments to third parties via the Internet or by phone, with credit or debit cards. By using these methods you are prone to fraud. You are giving your card number, the CSV and the expiry date. All the info that spells problems.
You have to trust that the other person will not commit fraud using your information. Most of the time you give this information to someone that you can’t even see face to face.
Although the banks have the tools to cover this types of fraud, it does not cover the reason why credit cards are so expensive in terms of interest rates.
A great advantage is the fact that Bitcoin doesn’t have that problem. Bitcoin works the other way around. You pay in advance, your goods then get shipped to your address without delay.
However there is always a risk in this kind of trading, and unfortunately difficult to avoid, and the same with anything.
Why do you see Bitcoin in particular, as opposed to similar currencies, as being the most popular for online payments?
Other than the worthiness of Bitcoin, the other currencies all depend on a third party.
“With Liberty Reserve, you have to rely on them not issuing more currency”.
With Bitcoin, however, it’s the first digital crypto-currency which has no trusted third party. This works because it refrains from double-spending.
When sending my Bitcoin, it transfers from my possession to yours. It doesn’t go anywhere; it’s stored on the block-chain. The alleged miners, maintaining the network, will validate the transaction.
When it has been validated, then you know that it has gone through. It’s recommended that you wait for 6 confirmations for the transaction to fully go through, and it cannot be reversed.
With any other digital currency, you could have double-spending. With currencies issued by people, there is no double-spending, but you are relying on third parties to take care of stock and control.
They are all possibly less reliable. It can be accepted that you would not trust an independent third-party to issue currency as opposed to your own Government? Even your own Government “counterfeits” its own money through Quantitative Easing and using banks to expand available money to clients.
Is there a ‘Gold Rush’ mentality by setting up Bitcoin exchanges?
MtGox doesn’t have any gain, as it was set up to trade cards. In addition, it can’t handle the volume of transactions, or people wanting to join.
There is a long queue. It also undergoes constant DDOS attacks, and operates in a broad unregulated space. If the first regulated exchange was set up in the UK, then we would have the first mover advantage and it would create a lot of push for BTC in the UK.
In developing a regulated exchange, what would the British Government need to do to facilitate it?
If we could succeed to obtain regulation which the banks are happy with, then we could have a ‘virtual City of London. That could be worth Billions to the economy. The American companies are not happy to be in the US as “they regard their Government as being a somewhat of a domineering state”. You couldn’t have the Bristol or Brixton Pound in the US, as it’s illegal. The Government here is more agreeable to acknowledge working with Bitcoin.
Have you considered the application of Bitcoin and the type of transaction that Bitcoin provides, in a consumer environment? Will Bitcoin-style transactions become mainstream?
Credit cards were first invented in 1965. When first issued the question most often asked was: ‘What do we need this for when we have cash and cheques?’
We can ask the same question regarding Bitcoin – what do we need it for? The view is that Bitcoin will have a place beside existing currencies. It might be that Countries end up having their own digital currencies, but that would not be easy as you cannot have any central control.
Bitcoin is the gold-plated medium for transferring value in the Internet economy.
Presently, we have one half – the Internet – where goods are provided, but on the other hand – credit cards are where large amounts of fraud take place.
When using Bitcoin, that level of fraud would be taken off the table. The only issue is when receipt of goods doesn’t happen, but that could happen in any commercial transaction and it would not be fair to pin this problem only to Bitcoin.
Do you see Bitcoin as being an eventuality of the Internet?
The Internet has brought a global marketplace to us.
However, this system has never evolved. When beginning to use credit cards, people were very skeptical; some even refuse to use them to this day.
We can be assured that the Internet will be enhanced by a global currency, as its market becomes a safer place to trade but more importantly:
Bitcoin will change the face of things which you cannot buy on the Internet.
Look at the following example:
Currently, you can’t buy one page of The Times for 2p. Because the minimum transaction cost on a credit card is 30p.
With using Bitcoin, instead of paying a subscription fee to a newspaper, you can buy articles one-by-one. It will assist the process of micro-transactions, a market completely unavailable at the moment because the system is not in place to do it.
Bitcoin is a system which could – would – be in place to do just that.
This could also save a lot of publications from disaster as people move away from print. The transaction cost is basically zero.
Where do you see Bitcoin as a currency and a ‘force in society’ going from here?
Firstly the major thing to solve is the applications have to become user-friendly, as everyone knows. It’s not easy to initially obtain Bitcoins and then to use them. Even having a Bitcoin app on your phone, there is a security concern.
Having electronic money on your phone is the same as cash in your pocket. If it is in your bank account it means that the bank keeps an eye on it.
Bitcoins are held on your device and can be stolen. Electronic currencies will have to become more secure and more user-friendly to become mainstream, but that is due to happen soon.
How easy is it to set up an exchange?
Firstly, the design and writing of the exchange software. Michael’s software is already in place, but that has cost a lot of money. The cheaper software has been written by others and they are just not strong enough. Setting up the security controls, which cost hundreds of thousands of pounds, if not more. Some of the exchanges being set up are not addressing those problems.
So in building better exchanges with better security, Bitcoin becomes a more robust proposition.
If the exchange is in the UK, it is not just for the UK – it will be worldwide, so you’ll have the whole global market at your fingertips.
The current system of money, regardless of what people think, it is a huge illusion made by governments and central banks. Bitcoin, however, is made by the people, for the people.
Bitcoin is a safer option than current currencies because there will not be any inflation. a Person’s money will be more protected in terms of their savings; The US Dollar has decreased in value by something like 98% in the past 5 decades.