Blockchain really has the potential to revolutionise the financial system, Cooke said, and banks and insurance companies are starting to wake up to this. Cryptocurrencies, in contrast, were a niche product, very niche.
Later on at lunch, Metzger was again the evangelist and his audience sceptical. One could see why cryptocurrencies could be “mined”, and why they would be in short supply. One could see why entrepreneurs might want to issue them, rather than a conventional currency. What we could not see was why anyone would want to buy them.
His answer was that this represented a neo-liberal ideal, a currency or currencies which were freed from governments, not open to manipulation or debasement by the powers that be. Cryptocurrencies had not been developed before, but inevitably, now they were real, people wanted to experiment and to see what could be achieved by them.
But several of his audience said it is only national governments who have the credibility to make people believe in the dollar, or the euro or sterling and even they have to tread carefully to prevent a currency collapse.
The world is also full of old currencies where the government of the day no longer supports them, in which case they become worthless.
Precisely, says Metzger. That is why we need cryptocurrencies, and an exchange where they are all traded, so money will no longer be the plaything of governments.
Well, up to a point. But there is already a currency which is independent of national governments.
It is one with thousands of years of history. It is unique in the world. It is in short supply, though its miners do exist, as indeed do the vaults to store it in. It has virtually no uses, other than jewellery and it is virtually impossible to steal because it is so heavy.
It is, of course, gold.
But interestingly gold has been in the doldrums for some time. Back in 1981, it surged because speculators really thought the dollar and all the other currencies were liable to collapse. Institutions and others often had a hedge in gold of 10%.
But that episode passed and, in inflation-adjusted terms, the metal has never again got near to its then peak.
Instead it grinds along, normally between $1100 and $1400 an ounce. Even when there is tension in the world, and people want a safe haven to put their money in, they have not bought gold like they used to, or certainly not enough to make a difference.
Ross Norman, the chief executive of Sharps Pixley, made this point well in a blog last week, talking about the London Bullion Market’s conference in Boston. “It was the ‘financials’ session that surprised — they matter, these chaps had worked for organisations with $148 billion, $18 billion and $1 trillion under management — and they struggled to elucidate why gold should be on the menu. Gold is unloved and currently not relevant,” he wrote.
Obviously he is right. The point is though that if gold cannot cause a stir when other currencies look vulnerable, why should cryptocurrencies? And if cryptocurrencies do not replace normal currencies, what other point is there?
Blockchain is worth pursuing but cryptocurrencies are just a curiosity.
Just because they are new, it does not mean they are interesting.
