The New York venture capitalist stole the show at a state hearing on regulating virtual currencies. Here's what he said.
He's not know for staying mum. The prolific blogger and investor Fred Wilson delivered testimony at a hearing Tuesday on the future of Bitcoin regulations in New York--and along the way, embarked on a bit of futurism. If you like the way Wilson makes bets with his venture-capital fund, Union Square Ventures, which has invested in Etsy, Tumblr, and Twitter, you might just like the way he thinks about the future of currencies. Below are his five predictions for the future of money.
1. Bitcoin will stabilize in price in the near future.
Early adopters of Bitcoin--those who decided to buy early--are reaping the benefits of getting in on the ground floor. (A little more than a year ago, a single bitcoin was $10; today, it's more than $1,000.) Wilson likens that "early adopter advantage" to being an early employee of a successful startup, such as Facebook. Those lucky individuals may reap a big benefit once, say, when the company goes public. But eventually, any benefit to being an early adopter flattens out. How soon will the bitcoin value flatten? "Some people think we're already there; some people think we have a long way to go," Wilson says.
2. The corporate clones are coming.
The technology behind Bitcoin--its ever-updating virtual ledger, for instance, which cuts down on transaction time--is enviable to big banks. Wilson predicts: "We will see the banking industry and other interested parties come up with their own implementations of a virtual-currency model." But, he also predicts these mock Bitcoin systems will never gain mass-traction, and will eventually fail.
3. Banks will get a fast-lane.
During yesterday's hearing, Wilson bemoaned the time he's spent waiting two weeks to open a bank account, or waiting days to send money to a friend. (Even Benjamin M. Lawsky, the New York State finance superintendent, complained about the three-day lag in paying his credit card from his checking account--at the same bank.)
How could that be fixed? Big banks could take a page from the Transportation Security Administration's playbook and create the finance version of the "known traveler" lane.
"Once you establish yourself as a known banking customer, moving accounts could be instantaneous," Wilson said.
4. Many will play; Bitcoin will win.
When asked by a panel of New York State regulators whether future Bitcoin competitors could emerge and become the dominant virtual currency, Wilson asked the regulators to think about the history of protocols--the sets of rules under which data is transmitted. He said when competing protocols emerge, it's been shown to be a "winner-take-all game." And, for now, "certainly bitcoin seems to be by far and away the most popular virtual currency." So, Bitcoin will win, Wilson says. And he acknowledged that it could provide a platform for development of other currencies--on top of the Bitcoin architecture.
5. China can be seen as an anti-bellwether.
"The lesson from the Internet is, anything that China bans, invest in it," Wilson said Tuesday, seemingly half in jest. But he backed up his comments on his blog, noting that: "My point being that the services China likes to block are the really important ones that have been built on the Internet." He's referring to the country's bans on citizens' access to Facebook and Twitter--both of which, from a venture-capital perspective, would have been great bets.