Any other business

Maybe bitcoin isn’t the work of the devil, after all

Plus: Standard Chartered; Britain in the Prosperity Index; and does any bank really help small businesses?

7 November 2015

9:00 AM

7 November 2015

9:00 AM

I confess to being an out-and-out Luddite when it comes to bitcoin and other so-called crypto-currencies. To the extent that I think about them at all, I think that they are an ephemeral by-product of those creepy ‘virtual worlds’ in which obsessed gamers eventually go mad; that only such lost souls could seriously believe unregulated online money might eventually supplant the state-backed real thing; and that fashionable belief in them can only lead to fraud and loss. In short, I concluded some time ago, they are probably the work of Satan.

‘Every normal person above the age of six and not over-affected by chemical stimulants should [grasp] that societal concepts such as “money” and “law” are not identical to the tokens and rules that hold sway in games,’ I ranted in a review of Wildcat Currency by Edward Castronova, an ‘expert on the societies of virtual worlds’ at Indiana University whose wacky ramblings re-inforced my hostility. Encounters in London with the clearly benign and well-intentioned Stan Stalnaker, whose Hub Culture social network runs its own currency called the Ven (‘Every time you use it, you’re helping the planet’), did not change my mind.

So I’m perturbed to learn that the ‘blockchain’, the key software behind bitcoin and its ilk, is being investigated by major banks and consultancy firms as a potentially revolutionary mechanism for all our transactions. Using a database shared by a network of computers without a central authority, this could — the FT says — improve security for end-users while slashing costs across the financial sector by $20 billion a year. Even the Bank of England is said to be thinking positively about it. As with so many other changes in modern life and mores, I may one day have to set my prejudices aside.

Even less dull

‘If a bank looks dull, it probably isn’t’ is a maxim I applied some time ago both to the Co-operative Bank, with its broken balance sheet and naughty-vicar chairman, and Standard Chartered — which until 2012 was regarded as the steadiest of overseas commercial banks, rooted in its traditional Asian markets, resistant to takeover, and led by a sensible chief executive, Peter Sands, whose star rose as others fell during the financial crisis. Then came fines from the US for industrial-scale Iran sanctions-busting — and latterly profit warnings, a boardroom clear-out and a new-broom successor to Sands in Bill Winters, formerly of JPMorgan.

Now the bank has fallen into losses; it is about to axe 15,000 jobs and plough $1 billion into strengthening its compliance function to avert further scandal; and it needs $5 billion of additional capital to be sure of passing an imminent Bank of England ‘stress test’. A strong franchise in China, until recently a big plus, is now seen by investors as a liability as the Chinese downturn gathers pace. The bank’s shares have plunged 40 per cent since March; the biggest shareholder, the Singapore state investment fund Temasek, must be feeling queasy; and a merger with a stronger partner can no longer be off the agenda. Who’d have thought it might come to this? The trouble with a well-earned reputation for dullness — Lloyds and its HBoS takeover being another case in point — is that it often tempts bankers towards less dull roads to ruin.

Challenges to prosperity

The UK is the best country in Europe in which to start a business, says the Legatum Institute’s annual Prosperity Index; with basic costs of just £66, we also offer ‘the third cheapest place in the world’ to launch your would-be Icap or Boden. It’s a trend observable not only in the statistic that 600,000 new businesses are expected to have registered this year (up 36 per cent since 2011) but, if you look around, everywhere: among my friends, I hear tell of an antique shop, a cleaning venture and a geopolitical consultancy, all in the past fortnight. This despite the perils of the Living Wage, business rates, health-and-safety and all the rest.

No challenge is insurmountable, my entrepreneurial chums tell me, but there’s one that’s especially irritating — and that’s the difficulty of opening a bank account for a new business. Our high-street banks, in post-crash sackcloth-and-ashes mode, have been under pressure from government to do more to help small firms. But the truth is they don’t really want start-up customers, who have high propensities either to fail within the first two years or to under-estimate by miles the credit their business will need if it takes off successfully.

So the banks’ answer has been to offer attractive-sounding ‘start-up business account’ packages (including periods of free banking ranging from six months at Lloyds to 25 months at Yorkshire Bank) but to make the preliminary form-filling forbiddingly onerous, supposedly to weed out fraudsters — who of course get round it by stealing other people’s identities anyway.

Clearly this leaves a gap to be filled by ‘challenger banks’ that present themselves as business-friendly — such as Aldermore, Handelsbanken and, for those in its region, Cambridge & Counties. I’ll be interested to hear ( from any entrepreneur who has found a bank that’s genuinely keen to help.

Luck of the Irish

Another nugget from the Prosperity Index is that Ireland, in tenth place, ranks well ahead of the UK (15th) for overall prosperity, despite being well behind us in the category of ‘entrepreneurship and opportunity’. This contrary result derives partly from the UK’s poor score for education, which should give us serious pause for thought. Meanwhile, post-bailout Ireland — flat on its back when I first visited in 2010 — is the best performing economy in Europe, with growth expected to exceed 6 per cent this year. If the Index had a category for ‘resilience and riding your luck’, the Irish would surely come top. Happily I’ll be in Dublin again this month, and will report back.

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Show comments
  • Alex Moss

    And how did you feel about the internet before it became established? That unregulated network of information transfer, that couldn’t possibly work until it changed the world.

    • JabbaTheCat

      The net was a great place before the masses found out about it…

  • rtj1211

    I think you’ll find that ‘State’ and ‘Law’ are about as flexible as the ‘rules of games’….the State is utterly corrupt, the lawmakers utterly biddable and the judges that interpret laws equally ‘flexible’………

  • woozlecat

    I find Bitcoin quite useful. The main disadvantages are the difficulties that the banks put in your way for buying them and the limited number of outlets where I can spend them. As more people adopt the technology, these problems will diminish.

    • darren kis

      Get an account at and a Xapo debit card. You can now spend bitcoins at any shop that accepts Visa. I’ve been using mine for the last month.

      • woozlecat

        Noted. Thanks.

  • polistra24

    The problem with this line of thinking: there’s no such thing as “without a central authority”. Whenever a source of tremendous profit is available and controllable, SOMEONE will step up and control it. Since all bitcoin transactions run through the Net, and all Net transactions run through NSA, the Bitcoiners are fantastically stupid to believe their system is “independent”.

    Plain old paper and metal currency has a much better chance of being independent and untraceable.

    • Malcolm Stevas

      Though you need to find ways around the State’s “anti-laundering” laws which cause banks to query large cash withdrawals and report you to the Feds…

      • Des Demona

        Easiest thing in the world. You pay someone with a clean record to set up a bogus shell company. IT consultancy is the easiest because there doesn’t have to be any physical stock or goods transferred – easy to pick up by Customs.
        Half a dozen bogus companies purchasing IT know how in Colombia the same in the UK allegedly supplying consultancy and knowhow and you can launder millions of dirty drug money into apparently clean UK bank accounts.

        Then you buy a house in Park Lane.

    • Paul B

      There’s no arguing with Maths. Unless you’re Daviddeparis.

  • Davedeparis

    Conspiracy theories aside, bitcoin has great potential but not as daily across the counter currency like many of its original supporters hoped, unless you really want to buy vegan pizza in hipster Brooklyn or Berlin. It might be useful for international transactions but it has light years to go in acceptance before that happens. However, as an alternative and or supplement to gold it is in a class of its own. The author seems to have caught up with the “blockchain not bitcoin” thinking that is so à la mode right now but in time one suspects the futility of reinventing the wheel will become clear.

  • Francisco F.

    Questions: … You’re using the Bank of England as serious reference? … I do not understand … The Bank of England (and this is not a supposed conspiracy theory always denounced by the politically correct Marxist …, that’s a fact!), It is actually a British government bank? Who are the owners of the Bank of England … and the US Federal Reserve? Because they use fanciful names – that hide their origins … The BitCoin was created by whom? The name is true? It is a pseudo-ex-Communist Chinese? Very confusing all this, I can not trust … Today I am still halloween ???? AAAAAAAAAAAAAAAh …: – /

  • Struthers Gunn

    Indeed. They are not identical to a game. They are very serious things which work ensemble to fasten vast numbers of people to a set of rules which ask them to apply ‘game theory’ to many facets of their lives. In the words of the Cheshire cat: ‘whoo are youu’?