Bitcoin, the digital commodity currency, transaction protocol and a masterpiece of cryptocurrency innovation, has generated controversy worldwide. Some countries have banned it, while others like Germany, Hong Kong and Singapore have embraced it. It’s influence has been growing in recent years, especially in the emerging markets of Southeast Asia.
David Moskowitz, a Singapore-based Bitcoin broker, trader and consultant, through his firm Coin Republic, is often called upon to share his expertise and understanding of the digital commodity currency Bitcoin by the media, private firms and government agencies.
Considered by many to be one of the foremost subject matter experts in Singapore – and possibly Southeast Asia – Moskowitz sat down with DEALSTREETASIA to share his knowledge of the Bitcoin ecosystem and where he sees it progressing.
Excerpts from the interaction:
As a broker and consultant, what’s your outlook on the Bitcoin and cryptocurrency space in the Asia-Pacific, as well as prevailing trends?
Bitcoin and blockchain are the 21st century’s ‘Rails’ (i.e. application development framework) for payments, remittances and transfers of digital assets. Its usage really depends on the geographic location. In Singapore people are using it as an asset class, but its slowly growing in its use as a remittance instrument.
There’s also some niche usage as a merchant payments method. It’s usage really depends on the user as the entire network is agnostic to how it’s used, so long as you follow the rules of the bitcoin protocol. It’s permission-less, so anyone can build on it without asking for permission from some central authority.
What do you see as the most promising uses for Bitcoin and the underlying blockchain tech, in terms of ventures that can build traction rapidly?
Payments, as well as its use as currency and transaction protocol at the Bitcoin 1.0 stage are what its currently being used for. Bitcoin 2.0 will utilise the underlying blockchain technology to build additional functions, such as for maintaining cryptographic digests of documents and archiving them for historical reference, smart contracts and the tokenisation of data and resources.
Ripple and Ethereum – how do you summarise the difference to fintech investors and what are their benefits relative to Bitcoin?
I see Ripple as an incremental improvement in the existing system. For businesses with established trust networks, like interbank transactions, Ripple provides a more efficient solution. However, it replicates some of the problems of the existing financial system, due to its IOU nature, whereas Bitcoin is an asset-based transaction.
Ethereum is quite interesting, if it can live up to the promises. It should offer more advanced smart contract abilities and other programmable digital asset transfer mechanisms. I think that both of these protocols will increase Bitcoin usage in the long term, as they both can hook into the bitcoin network.
How do you predict the distributed autonomous corporations (DACs) powered by the blockchain converging with machine learning and AI – given the increased investment these fields have seen in the last few years?
Machine-to-machine (M2M) payments are quite an interesting application which will benefit from crypto-currencies. I’m not sure if Bitcoin is the most suitable payment method due to its current price volatility. Sovereign cryptocurrency units could be a better solution in an M2M solution.
Looking ahead 10 years from now, I can see Uber-like systems using autonomous systems to conduct transactions amongst themselves, between the autonomous device and various agencies like commodity suppliers.
More than a few people have said that while banks are interested in the blockchain technologies, they are disinclined to deal with Bitcoin. However, they’re integral to each other. How do you think organisations will overcome their discomfort with Bitcoin and can the blockchain and Bitcoin be disassociated?
Right now, there’s an immense interests in blockchain technology and Bitcoin. However, due to negative press the banks have to position themselves carefully with regards to bitcoin technology. They’re creating research infrastructure (i.e. hackathons and laboratories) dealing with blockchain technology as a first step into the cryptocurrency space.
As they grow the ecosystem and positive uses are discovered, they’ll come to speak more about Bitcoin itself. BTC may become a back-end system for the existing financial system, in terms of managing transactions, enabling the transfer of digital assets between and amongst banks, in addition to acting like a notary-like system for proving that transfer.
The use of the blockchain’s triply-entry public ledger and smart contract capabilities – do you see an impact with regards to public policy and corporate governance?
I think blockchain technology makes the transfer of assets transparent. And transparency is always a good thing for corporate governance. The triple-entry public ledger system would also be good as a tracking system. It’s a trust-less system for tracking transactions between company A and B, making a time-stamped, irrevocable record that can’t be entered at a later date to cover activities like a misappropriation of funds or tax evasion.
For governments, it ensures that they can monitor whether corporations are properly accounting for the transfers of funds. It’s not possible to go backwards and change entries, so it avoids a situation where payment was made on a certain date and the record is altered to reflect something else, preventing fraud from occurring. Using blockchain, they either prove that they did or did not execute a certain transaction at a specific time to a particular party.
You currently operate a brokerage and consultancy that deals with Bitcoin and cryptocurrencies. If you were looking for investment to build up your own venture, what would you say is your value proposition and how much capital would you need?
I offer a very safe and efficient way for people to purchase Bitcoin in Singapore, using the local internet banking system. When funds are transferred , the system automatically purchases bitcoin on their behalf and sends it directly to the wallets they control.
I take on couterparty risk rather than the client. I don’t hold Bitcoin for the customer, so there’s no risk for hacking as long as the customer properly secures their own wallet. There’s no access to customers Bitcoin, so no possibility of theft, hacking or misappropriation of the bitcoins through Coin Republic’s service.
The investment needed is actually quite high because its a capital-intensive business with small margins. The majority of capital goes towards having cash available on exchanges and having reserve cash available for people who wish to sell their bitcoin. The more capital that is available, the larger the transaction size I can handle.
Credit Suisse recently published a paper exploring the integration of Bitcoin with conventional financial systems. What’s your take on their stance?
I thought overall the article was good until they talked about trusting a central bank versus using an anonymous online network. Bitcoin is far from anonomyous. Its code is open source, and transactions are recorded on a public ledger. Contrast this with a central bank, who are almost never audited. There’s no one asking to audit the Bitcoin network because its audited with every transaction thats made on it.
I use a similar online network called the Internet everyday, so I’m quite comfortable using a pseudo-anonymous network that’s for digital assets which has been vetted by the world best cryptographers and has securely transferred billions of dollars and millions more by the hour.
Three centres have emerged as Bitcoin hubs in the Asia-Pacific. Amongst the three are Tokyo, Hong Kong and Singapore. Which is the most promising?
I think Singapore is the most promising. Hong Kong as a financial hub has established itself but is always under the shadow of China. Japan also has the potential to be a hub however, their government tends to be very slow to react and so far has made many poor statements in regard to Bitcoin.
Singapore is quite promising, and up to now the government has taken a laissez faire approach to digital currencies and tends to be extremely practical regarding regulations in this area.