PwC release Bitcoin paper

Since the dawn of Bitcoin there has been a constant song of how it will be the next technology revolution. A revolution in a similar vain to how the internet revolutionised the world. Numerous countries banned the use of Bitcoin whilst others were skeptical and some even adopted it.

Admittedly, media coverage of cryptocurrencies has been associated with certain illicit activities does give potential investors a reason for concern. However, this will certainly change as the industry develops.

PwC is one of the four biggest advisory firms and operates in over 150 countries worldwide and Vault Accounting 50 has ranked PwC as the most prestigious accounting firm in the world for seven consecutive years.

In a 17-page document released by Pricewaterhouse Coopers (PwC) states that it is no longer a question of if cyrptocurrencies such as Bitcoin will transform financial services but it is now a question of “…how it will evolve.”

Interestingly PwC are quick to point out the deficiencies of Bitcoin in comparison to the US dollar in respect of the former not available in physical form, not being legal tender, not being backed by a government or legal entity and being completely decentralised. Yet it is just these very qualities that give Bitcoin its truly revolutionary power – the ability to create an independent, decentralised monetary system beyond the scope of any central authority yet organized and policed by each individual trustless user.

Why are PwC interested in Bitcoin?

To answer the above question simply – Bitcoin is going to change the world. On the left hand side of PwC’s primer are three questions. The second question: “How might the technology behind it disrupt financial services?” is an indication of the threat cryptocurrencies and a decentralised blockchain poses to the current financial system. Do I really have to remind anyone about the 2008 financial crash caused by greedy bankers and rigged LIBOR rates?

Fundamentally cryptocurrency is a direct threat to the current form of finance.

Fiat money is:

  1. inconvertible paper money made legal tender by a government decree
  2. is not fixed in value in terms of any objective standard
  3. is intrinsically valueless

On the other hand:

  1. Bitcoin is decentralised and those no central entity can inflate the price or manipulate its supply, unlike fiat money.
  2. Bitcoin is completely free to transfer and hold, unlike fiat money.
  3. Bitcoin has privacy protection hardwired into its very core. Although the public ledger is extremely transparent and although Bitcoin accounts are numbered, no personally identifiable information is attached.
  4. An additional side effect of the decentralised nature of Bitcoin is the freedom to transact as funds cannot be frozen or seized by an intermediary. Jerry Brito, a senior research fellow at the Mercatus Centre at George Mason University, explains on his blog that, “…to seize bitcoins you do need to get the “password” that controls them. You can’t just go to an intermediary and order that an account be frozen as you can do with traditional financial intermediaries like banks or PayPal.”
  5. Bitcoin, like other cryptocurrencies, are revolutionary as they have the potential to allow users across the globe to access a payment system in which participation is only restricted by technology and not factors such as having a credit history or a bank account.
  6. Bitcoin is not intrinsically valueless as it can never be detached from the underlying blockchain technology which grants Bitcoin its intrinsic value.

Cryptocurrencies may threaten central control over financial markets but PwC insist that there are number of opportunities for cryptocurrencies to flourish whilst not threatening the existing financial structure.

PwC are adamant that cryptocurrencies will benefit users due to cheaper transfer costs, although this would reduce the income to financial institutions.

A further worry is that because Bitcoin is simultaneously a currency, a financial asset and a technology protocol, there is a danger the use of Bitcoin could develop separately and in different directions.

More importantly and excitingly is the scope for blockchain based solutions. One idea that I plan to work on as part of my masters, and is highlighted by PwC, is to merge blockchain technology with property in order to create smart property that can be automatically traded via the blockchain.

One thing is clear, for “…Bitcoin to gain mainstream acceptance and stable expansion, each of the five market participants – merchants and consumers, technology developers, investors, financial institutions and regulators – [must] play a role.”


Cryptocurrencies are a direct threat to the existing monetary system. Alongside less government control over financial markets, the financial services would suffer a decrease in revenue from transfer services and credit card transactions.

Bitcoin is in its infancy and for it to reach its revolutionary capability it must be used to such a degree that it reduces its price volatility. Yet, the positive attributes of Bitcoin have brought with it a “dark side” that can be exploited to create further threats such as tax evasion or terrorist financing.

My opinion is that the likes of PwC are keen to direct and mould the growth and use of cryptocurrencies in order to dampen the revolutionary power behind it.