Five years ago, “Bitcoin”, “blockchain”, and “cryptocurrency” were not in the common lexicon.  Five years ago, Bitcoin, the seminal cryptocurrency, was valued at approximately $275.00 (a staggering 2,749,900% return on investment for those who obtained it for less than a penny in 2010), but very few accepted it as a method of payment.  In fact, the first person to buy a pizza with Bitcoin, a Florida programmer, had to route his transaction through England.

Bitcoin (BTC) captured the public’s attention when its value neared $20,000.00 in December 2017, taking other crypto-currencies along for the ride up  . . . and then down as Bitcoin sunk below $3,500.00 one year later.  The high valuations encouraged the creation of speculative “altcoins” (alternatives to Bitcoin) sold to investors in “ICOs” (initial coin offerings) until the Securities Exchange Commission and Commodity Futures Trading Commission took an increased interest, thus tamping down the euphoria.  Today, there are thousands of cryptocurrencies; but the top 10 represent approximately 85% of the crypto market, and Bitcoin aka “crypto gold” dominates the field.  Bitcoin’s market cap of $175+ billion is more than double that of all other cryptocurrencies combined.

Franchise Unit and System owners can therefore appreciate the value of cryptocurrencies like Bitcoin as an investment, even if the Chairman of the SEC famously refused to call it a “security” in 2018.  But what about the value of Bitcoin (or other cryptocurrencies as a means of payment, a medium of exchange?

For many, Bitcoin’s volatility precludes its use as a means of payment.  (Interestingly, the price of Bitcoin, has stayed relatively stable since May, hovering between $9,000 and $10,000.)  “Stablecoins”, cryptocurrencies backed by a reserve asset or basket of assets, have risen as an answer to the stability issue.  The most used stablecoin is currently Tether (USDT), a stablecoin tied to the U.S. Dollar, which now exceeds Bitcoin in daily volume.

Tether is a centralized cryptocurrency (not an oxymoron) run by a private company, Tether Limited.  While there are different Tether coins, the chief one is USDT, tied to the U.S. Dollar.  Tether maintains that every USDT is backed by the equivalent of $1 in reserves of traditional currency or other cash equivalents.   Perhaps Tether cannot be trusted to maintain the ratio any more than a bank, but it is the chief way to exchange digital “dollars” until the U.S. adopts a digital dollar . . .

Which may be coming very soon.  Committees in Congress (e.g. Senate Banking, Housing and Urban Affairs Subcommittee on Economic Policy and the House Financial Services Committee) have begun talking seriously in hearings about the benefits of digitizing the U.S. Dollar.  Perhaps buzz has been spurred by the nascent Digital Dollar Project, a think tank, which released a white paper earlier this year.

Meanwhile, in a major development this week the Office of the Comptroller of the Currency wrote in a public letter that nationally chartered banks in the U.S. could provide “cryptocurrency custody services, including holding unique cryptographic keys associated with cryptocurrency,” which may extend beyond passively holding cryptocurrency keys.  This provides an alternative from existing ways to “hold” cryptocurrency; you can now entrust a nationally chartered bank to “hold” your cryptocurrency as opposed to holding it on a cold (offline) or hot (online) wallet.

The future will likely see increased adoption of currencies secured by cryptography, with one or a select few of them going mainstream.  Savvy business owners should begin learning about this topic now, if they haven’t already.