Bitcoin startup Xapo recently announced that three financial eminences had signed on as advisory board members: former U.S. Treasury Secretary Larry Summers, former Citibank Chief Executive Officer John Reed and Visa founder Dee Hock.
The news signaled that Wall Street is taking bitcoin seriously, which may surprise those who have followed the electronic currency’s decline.
Starting late last year, bitcoin-related headlines were uniformly grim. My Bloomberg View colleague Mark Gilbert noted in December that the value of a bitcoin had fallen more than 56 percent since January, beating out the Russian ruble and the Ukrainian hryvnia for the title of worst performing currency of 2014. Quartz wrote that bitcoin’s fall was steeper than the collapses of crude oil and the ruble. By the beginning of this year, publications had declared that people had lost faith in bitcoin. Columnists wrote that it was at death’s door.
The news of bitcoin’s death, it seems, is greatly exaggerated, especially now that the banking world is taking the digital currency seriously. Last fall, two U.S. banks agreed to use software created by Ripple Labs, whose real-time, cross-border payments product is based on bitcoin technology. In January, a startup called Coinbase, which essentially stores people’s bitcoins for them, said it had received $75 million from investors, including the New York Stock Exchange, the Spanish bank BBVA, former Citigroup CEO Vikram Pandit and former Thomson Reuters CEO Tom Glocer.
In April, Goldman Sachs Group led a $50 million investment in bitcoin startup Circle Internet Financial. And in March, Blythe Masters, the former JPMorgan Chase executive who pioneered the use of derivatives, became the CEO of Digital Asset Holdings, a software company that is building a trade-settlement platform for digital currencies and digitized versions of more commonly used financial assets such as traditional currencies.
Then last week came the Xapo (pronounced zappo) news, with Hock, Reed and Summers lending their pedigrees to a bitcoin storage company about which few have heard.
Wences Casares, Xapo’s co-founder and CEO, says there was no watershed event that convinced Wall Street executives to take bitcoin seriously. Rather, he says, the financial services world has been tracking bitcoin since it started to gain attention a few years ago.