Swansea councillor wants Wales to be at forefront of Bitcoin revolution
Richard Youle, local democracy reporter
A Swansea councillor believes Bitcoin will one day underpin the world’s financial system and would like Wales to be at the forefront of the currency revolution.
Will Thomas has invested in Bitcoin for years and hopes businesses which trade in it will come to Wales in the future.
Bitcoin is referred to as a cryptocurrency but Cllr Thomas said he preferred the term ‘peer-to-peer decentralised currency’.
“The cryptocurrency industry is still a Wild West,” he said. “Bitcoin is different to this.”
Cllr Thomas said that Bitcoin was completely decentralised and that it couldn’t be shut down or interfered with.
Bitcoin is a digital or virtual currency created in 2009 which facilitates instant payments without the need for a central bank or other type of administrator.
Each Bitcoin is a computer file which is usually stored on a digital wallet on a computer or smartphone.
You can buy them using real money or get paid in them when you sell things. Bitcoin has been accepted as legal tender in El Salvador.
Although this might all sound strange, it’s not impossible to grasp. Things do start to become complicated though.
Bitcoins can be mined electronically. Every transaction is recorded in a public list called the blockchain.
Every Bitcoin is broken down into 100 million Satoshis – named after Satoshi Nakamoto, the person or pseudonym of the person who created the digital currency. And only 21 million Bitcoins will ever be created.
“It’s a very exciting technology,” said Cllr Thomas.
Bitcoin’s value has soared but it is extremely volatile.
“It’s gone up 350% this year alone but it’s crashed twice in between by 50%,” said Cllr Thomas.
The Conservative ward for member for Newton said there might be a day when everyone used digital currencies to pay for goods and services but he viewed Bitcoin as “a store of value”.
“I liken it to digital gold,” he said.
The 39-year-old, who also runs an antiques business, said Bitcoin’s rising value rewarded saving rather than spending.
In his view if it was used as the currency standard it would dampen debt-fuelled consumer spending, in turn benefiting the environment.
The colossal energy use associated with Bitcoin mining – the electronic process by which new Bitcoins are entered into circulation and by which new transactions are confirmed by the network – has garnered a lot of headlines.
One recent example was a gas power station in upstate New York which uses a large chunk of the electricity it generates to power computer servers to mine Bitcoins.
China has cracked down hard on Bitcoin mining.
Cllr Thomas said mining carried out in the Western world tended to be less environmentally-damaging.
He said he had not cashed in his Bitcoin currency but admitted he couldn’t help checking its value. “A minimum of once a day,” he said. “But there’s no need to.”
At the time of our interview, one Bitcoin was worth £47,858.
For a while Bitcoin was accepted as payment at Mumbles Coffee and is due to be again when an updated digital wallet is finalised for the business said Gareth Davies, who runs the business with his wife Lynne.
Mr Davies said the previous digital wallet could take a few minutes to complete the transaction – not ideal if someone was buying a cappuccino.
He said there were about half a dozen customers who would pay by Bitcoin.
“We had a sign outside and people were always interested in it,” said Mr Davies.
He added that, having researched the subject, he has invested in the digital currency. “The more you read, the more you are interested,” he said.
Cllr Thomas urged people to do their research and not consider investing money which they needed to pay their bills. “Don’t use that money,” he said.
Simon Rudkin, a senior lecturer in economics at Swansea University, said Bitcoin was now an established part of the financial landscape.
“From the economic perspective the value in any currency comes from the fact that we believe the piece of paper in our hands has worth,” said Dr Rudkin.
“This should be no different when it comes to replacing that paper with a digital code.
“It is right to say that not being within the control of one government, or one political system, is an advantage and having a truly global system of exchange brings benefits.”
He said these may be felt more in developing economies where local currencies and political systems were more volatile. But he also pointed out risks.
“The fact that Bitcoin is not anchored by a government means that it is susceptible to wilder swings in value and ultimately has the potential to collapse,” he said.
“We cannot talk about cryptocurrency without talking about mining and the potential criminal risks.
“These are the negative headlines that surround the technology and that the industry is working hard to address.
“On the environment technology is the friend both in terms of green electricity and more effective computational power.”
It seems like Bitcoin and other cryptocurrencies are here to stay.
“We are seeing central banks talking seriously about cryptocurrency; the rise of Bitcoin is undeniably forcing their hand on that one,” said Dr Rudkin.