Bitcoin takes steps towards gaining respectibility

The cryptocurrency futures to start trading in Chicago

Bitcoin is set to take a big step towards respectability as the cryptocurrency starts trading Sunday evening on the Chicago-based Cboe Futures Exchange.

It's still early days for anti-establishment currency which started life in 2009 in the aftermath of the global financial crisis. Those who are drawn to the idea may want to approach it with caution as it is largely unregulated around the world and there's no clear and transparent way of valuing it.

The proponents of bitcoin, like the American entrepreneurs the Winklevoss brothers Cameron and Tyler, who have made their fortune on the back of the cryptocurrency, liken it to an upgraded version of gold, providing investors a hedge to any turbulence in the mainstream financial system as happened in 2008. It is also increasingly being used to buy things online and the number of retailers accepting the currency is growing.

While the cryptocurrency has legitimate uses for conducting financial transactions using blockchain to provide instant payment, it has also been associated with criminal activity.

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The cryptocurrency has as many detractors as it has supporters but the fact that it has jumped 15-fold this year should make potential buyers wary of jumping into the pond quickly. As well as being used for criminal activities, digital currencies have also been subject to hacking and scams.

Chainalysis, a provider of anti-money laundering software, estimates 10 per cent of money intended for initial coin offerings were looted by scams such as phishing so far this year, according to Bloomberg.

Central banks over the past year have started to take notice. Bitcoin and other virtual currencies, which have seen massive growth in the past couple of years, are starting to face tighter regulations if not being banned altogether by some countries. It has also faced harsh criticism from bankers, including the chief executive of JP Morgan, Jamie Dimon, who has denounced the currency as a fraud. Other titans of the world of finance like billionaire investor Warren Buffet have dismissed it as a bubble.

The UAE's central bank is said to be finalizing a review of virtual currencies that may result in new regulations on the use of digital currencies like bitcoin. That's welcome news as the currency is gaining traction in the UAE and needs to be overseen in order to protect those who use it.