On February 27, 2014, Fitch Law Partners LLP posted a blog article regarding the volatile market for Bitcoin and the rapid rise of the cryptocurrency over the past two-three years. Over the past month, there have been several important new developments.
Bitcoin is a relatively new 'cryptocurrency' in which in which encryption technology enables consumers and businesses to exchange goods for currency over the Internet without having to rely on the element of trust in order to ensure payment. Users buy Bitcoins and load them onto a virtual wallet, which they can then use to transfer Bitcoins instantly and anonymously to other users anywhere in the world. As such, there are significant cost savings and efficiency benefits associated with the use of Bitcoin as a method of currency. As Venture Capitalist Marc Andreessen explained on the New York Times' Dealbook, "Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies)."(1) Many vendors are starting to consider Bitcoin part to combat the large fees charged by credit card companies which cut into sales margins. However, no central bank exists to regulate Bitcoin, and it entirely relies on peer-to-peer transactions and largely unregulated exchanges.