Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.

The End of the Beginning

Love ‘em or hate ‘em, we should all be watching Coinbase’s IPO carefully and wishing ‘em well. Then again, Coinbase doesn’t really need our crossed fingers. The company has had a stellar Q1 with revenues up by nearly three quarters to almost $2 billion. More importantly even than its financials, Coinbase could not have timed it better, with trillion-dollar Covid stimuli about to wreak havoc on the world’s fiat currencies.

But significant as Coinbase’s IPO is for the industry, let’s not misunderstand this milestone. This is by no means the end of the journey towards Bitcoin hegemony; it is not even the home straight. It is, however, the end of the beginning.

In the short term this will keep the spotlight focused on crypto, garnering more exposure and ‘legitimacy’ for Bitcoin within the traditional financial industry while providing another proxy for buying coins, just as we saw with Microstrategy or Grayscale’s Bitcoin Trust. That’s all gravy for the Bitcoin space, of course, but it will accelerate the transformation of the industry into something wholly different.

Because here’s what I expect to happen in the medium term. Coinbase’s numbers will attract any number of banks, payment providers, and traditional fiat-based financial institutions like moths to a flame. Wanting in on the crypto action, they will start offering their own customers the ability to buy bitcoin, and inadvertently open up the adoption floodgates further.

But as more users flock to Bitcoin, the clamour for self-sovereignty, greater simplicity, and fewer middlemen becomes even louder. This demand will be met by advances like the Lightning Network, Liquid, and the RGB protocol, which are already being developed at pace, and will ultimately mature to the point where they surpass centralized platforms. In parallel, increased corporate adoption will reduce and then eliminate the need to convert in and out of Bitcoin.

Just look at Caruso, one of California’s biggest real estate owners, which this week announced it will start accepting payment in bitcoin. Add to this Tesla’s announcement that it would allow purchases of its cars in bitcoin, and people can now pay for their accommodation, transport, and basic needs without ever having to touch fiat.

Tesla and Caruso are among the businesses that have shown us glimpses of what this future might look like, but there is much more work to be done before Bitcoin 2.0 becomes a widespread reality. A more accurate comparison to our current "crypto IPO" stage of development is the early days of the web when companies like AOL and Yahoo! ruled the roost. These early internet businesses may no longer be leaders, but they laid the foundations for the future hegemony, known as the World Wide Web, that dominates today. Bitcoin will go through the same transformation, the difference being that we have a much clearer idea of what the world looks like when it has achieved hegemony.

Running Toward the Abyss

No one expected traditional finance to welcome Bitcoin with open arms, but neither could we predict they would react to its rise in such self-sabotaging fashion.

Last week HSBC, in its infinite wisdom, decided that the best way to serve millions of its customers interested in boarding the Bitcoin bandwagon was to ban it. According to a screenshot doing the rounds on Twitter, HSBC will not allow customers to make further purchases of MicroStrategy shares, citing “a change of policy on virtual currencies.”

HSBC doesn’t explain this policy, but if true, one presumes that its stance centres around that old, regularly-debunked chestnut about money laundering. If so, that’s more a reflection of the bank’s less than stellar history when it comes to preventing financial crime in the fiat space, and the hope that appearing to act tough on Bitcoin will help burnish its battered reputation.

This won’t hurt MicroStrategy or Bitcoin one bit, but this exercise in futility will damage HSBC. Badly. Beside losing customers who want to invest either in Bitcoin itself or businesses that are securing their wealth in Bitcoin, the embarrassment of their inevitable backtrack (as we saw with JP Morgan) will be monumental.

But though traditional banking cannot compete in a world where Bitcoin is king, this doesn’t mean that individual banks cannot react, pivot, evolve, survive, and even be successful in this future world. With so much capital, brains, experience, and networks at their disposal, there is opportunity aplenty for forward-thinking banks to embrace the future.

I don’t blame HSBC for being terrified by Bitcoin’s rise and the prospect of being marginalized into irrelevance. But what would you do if you found yourself edging towards the abyss? You or I would do everything in our power to change direction. Others, it seems, would rather run headlong towards it.

Share this article
The link has been copied!