The cryptocurrency industry is boosting efforts to make Bitcoin and other virtual currencies accepted as forms of payments for goods and services, according to participants at a blockchain conference in Dubai on Monday.
So far, the nascent currencies are only used for speculation and as a store of value but companies including Pundi X and Graft, are working on point of sales systems that will allow people to use cryptocurrencies, whose combined market value has reached about $1 trillion, as they would cash in stores and for online.
"Our project is to encourage people to use cryptocurrencies in the real economy," Zac Cheah, Jakarta-based chief executive officer of Pundi X, told The National in an interview on the sidelines of the Dubai International Blockchain Summit.
"Say you own three Bitcoin. You may want to keep it for three months or three years but what if you want to use your Bitcoin. What is the easy way to use Bitcoin? I think this real economy usage is very crucial for Bitcoin."
Pundi X has raised nearly $35 million in an initial coin offering last year. That subscription is reopening this month to raise the roughly $4m needed to close the fund-raising round. The company is aiming to produce and sell over 100,000 point of sale machines in the next three years, Mr Cheah said.
While the meteoric rise of cryptocurrencies like Bitcoin has captured the world's imagination, it has as many people against it as it has for it. There are those who dismiss its worth, including the billionaire investor Warren Buffet, saying it is a bubble waiting to burst. Others chide the lack of regulation and use of the digital currency by crime syndicates and money launderers.
Meanwhile, central banks around the world, including the central bank of the UAE, have been looking at ways to regulate cryptocurrencies. The banking regulator in the UAE is finishing a review that may result in new regulations on the use of digital currencies like bitcoin, a person familiar with the situation said in September.
Portland, Oregan-based Dan Itkis, co-founder of Graft, a cryptocurrency and payment network, said that with greater adoption, the volatility of cryptocurrencies, which often rise or fall by more than five per cent on a daily basis, will lessen as will transaction costs.
Those costs on some currencies can make the purchase of everyday items, such as a cup of coffee, pointless when a $30 fee on a $3 cup of coffee is charged. There are about 200,000 Bitcoin transactions a day, 99 per cent of which are done through trades on exchanges, noted Mr. Iktis, whose company, like Pundit, is also raising funds through an initial coin offering.
"There's a lot of value locked up in cryptocurrencies, it's $1 trillion in value, and so you need to unlock it somehow," Mr Itkis told the National. "The biggest problem with cryptocurrencies today is the rate of fluctuations and the only way to solve to that is by injecting more transactions. The more transactions you have, the more liquidity you have."
While few retailers accept cryptocurrencies as a form of payment, industry executives say that may soon change as some of the world's biggest investment banks jump on the cryptocurrency train. Goldman Sachs, the New York-based investment bank, said in December that it was setting up a cryptocurrency trading desk due to increasing interest from their clients.
The biggest barrier to growth however is that less than 1 per cent of the world's population owns cryptocurrencies, Mr Cheah noted.