For the past 20 years, Derrick Nicholson has been working in currency markets, as a strategist and a trader.
He works with companies to purchase products around the world.
He moves money and he hedges, making investments as a way of insuring against future losses.
But the Kelowna man says the future of currency as we know it is changing, and everyday people stand to suffer the most.
含羞草研究社淚 think we含羞草研究社檙e heading for a currency crisis,含羞草研究社� Nicholson said this week. 含羞草研究社淐hange is coming and I含羞草研究社檝e looked at this for years. It含羞草研究社檚 not pretty but life is about change and hopefully some good comes of it.
含羞草研究社淚 think there is a massive transfer of wealth coming. I look at the markets today and there is so much volatility. I含羞草研究社檝e been a trader for 20 years and I含羞草研究社檝e never seen markets like this. It isn含羞草研究社檛 normal and the volatility is increasing.含羞草研究社�
According to Nicholson, many of the problems he sees coming are directly related to the way governments around the world are in control of currency.
Historically, most currencies were based on physical commodities such as gold or silver.
However, those days are gone, replaced with what含羞草研究社檚 now called fiat money, currency that a government has declared to be legal tender but is not backed by a physical commodity.
含羞草研究社淎ll currencies today are managed by governments and the movements that are made are not always in the best economic interests,含羞草研究社� said Nicholson.
含羞草研究社淐urrencies are constantly devalued by governments and central banks and what that means is inflation.
含羞草研究社淎s human beings, we think inflation is the natural order of things but it含羞草研究社檚 not. It含羞草研究社檚 a tax by government because the purchasing power of currencies is constantly devalued.
含羞草研究社淵ou can buy less today with your currency than you could 10 years ago and that含羞草研究社檚 because governments are (creating) money out of thin air.含羞草研究社�
But as governments around the world try to deal with economies that appear to be failing, there is a counter-movement underway that is providing an alternative currency.
In 2008, an invention known as Bitcoin first came to light. In 2009, it was released as an open-source, peer-to-peer computer software.
One of many different virtual currencies available today, Bitcoin has the largest market share and uses a technology called blockchain.
The blockchain is a public ledger that records Bitcoin transactions.
Thousands of computers work together to record every transaction using a mathematical algorithm, recalculating as many as 200,000 times in a single day.
Users are able to make transactions without the use of an intermediary or a banking system, and in a way, become a banking system without the banks.
One Bitcoin is currently valued at over $380 US and there are more and more companies accepting Bitcoin for services every day.
In Kelowna, businesses such as Rollingdale Winery, Duke and Duchess Clothing, Pawsitive Veterinarian Care, Hemp City and Kelowna Instaprint all accept Bitcoin.
含羞草研究社淭he positives I see with Bitcoin is it含羞草研究社檚 not controlled or owned by any government therefore it can含羞草研究社檛 be manipulated,含羞草研究社� said Nicholson.
含羞草研究社淚t含羞草研究社檚 a step in the right direction. It含羞草研究社檚 probably not the final product but it含羞草研究社檚 a move away from government manufactured currencies to a more free market way of trading which is how commerce should take place.含羞草研究社�
含羞草研究社⑩赌⑩赌�
Bitcoin as a virtual currency has had wild swings since it was first made available for public use. It has traded all over the map, from $11 US to its current status above $380 US for one Bitcoin.
If you want to buy or use Bitcoin in Kelowna it含羞草研究社檚 easy. On the corner of Bernard and Gordon, Steve Merrill sits in his office at Sovereign Silver & Gold Exchange and will convert Canadian money into Bitcoin using what looks like a traditional debit machine.
Lots of companies are in the Bitcoin business, with names like Coinkite and Coinbase. More are offering debit cards that use Bitcoin, with names like Xapo and e-Coin.
Kelowna was actually home to one of the first Bitcoin ATMs back in 2013 and there are reportedly now more than 500 ATMs worldwide.
That first ATM is gone from Kelowna, but Merrill has partnered with a Vancouver company called Netcoins含羞草研究社攖wo brothers who have created a virtual ATM using a smartphone app.
含羞草研究社淎 customer can walk in and buy 100 dollars worth of Bitcoin,含羞草研究社� said Netcoins founder and CEO Michael Vogel. 含羞草研究社淲e facilitate the heavy lifting to get that Bitcoin from us to the customer含羞草研究社檚 digital wallet where Bitcoins are stored. You can then open up your Bitcoin wallet on your phone.含羞草研究社�
Despite the increase in businesses using Bitcoin, walk down the street and ask people if they know about Bitcoin and the responses will range from zero knowledge or others who have heard about it, to those who thought it was a passing fad that went away.
含羞草研究社淚t含羞草研究社檚 a common reaction we get from a lot of people we talk to: 含羞草研究社業 thought Bitcoin died,含羞草研究社櫤卟菅芯可鐫 said Vogel. 含羞草研究社淏ut the reality is Bitcoin含羞草研究社檚 adoption rate is about six times faster than the early days of the Internet.
含羞草研究社淲e含羞草研究社檙e not that far removed from when the Internet was coming of age. Bitcoin is at the same kind of point in its lifecycle.
含羞草研究社淚t含羞草研究社檚 mostly early adopters and tech-savvy people who are interested in it today.含羞草研究社�
Vogel said the technology is ramping up and becoming more in the mainstream, as evidenced by the investment now being made in blockchain technology by major financial institutions.
含羞草研究社淭he funny thing is, a year ago all the American banks didn含羞草研究社檛 want anything to do with Bitcoin, they thought it was ridiculous,含羞草研究社� said Vogel.
含羞草研究社淏ut since August every major American bank and about 30 major financial institutions have invested in or started their own blockchain. Visa has started a pilot project in Europe to use an internal mechanism to move money around. Microsoft, Dell, Expedia are now all actively accepting Bitcoin.含羞草研究社�
At Sovereign Silver & Gold, Merrill says Bitcoin is a move away from the way things are done today as people heavily finance purchases using credit cards, lines of credit and mortgages, increasing debt and paying interest on their purchases.
At the same time, countries like Canada continue to go further into debt, borrowing money from the international banking system, creating money from bonds and continuing a cycle of debt that he said is out of control.
含羞草研究社淎ll money today is debt,含羞草研究社� he said. 含羞草研究社淚f the money is always charging you rent to the point where the rent含羞草研究社攖he interest含羞草研究社攅xceeds the money supply, the system fails. Talk to the people in Greece or in Venezuela where their currency has collapsed.
含羞草研究社淚n the 1970s, the federal government had almost no debt. Now the interest on Canada含羞草研究社檚 debt is $50 billion annually.
含羞草研究社淗istorically this kind of financing and borrowing has never worked.含羞草研究社�
含羞草研究社⑩赌⑩赌�
One of the current buzz-phrases in technology is 含羞草研究社榙isruptive innovation含羞草研究社櫤卟菅芯可鐢advances in technology that change the way industries operate.
As an example, Netflix was disruptive to video stores like Blockbuster as online movie watching supplanted the way we watch movies at home.
Gone are the days when you strolled through a video store to rent a movie.
Another example is a company like Uber, which has disrupted the taxi industry or Airbnb which has changed the landscape of the hotel industry.
Matt Crowell is the CEO of Kelowna-based tech company GetInTheLoop. He has a master含羞草研究社檚 degree in innovation and entrepreneurship.
When it comes to advancements in technology, Crowell said there are two types of innovations.
One is incremental where something is constantly improved such as the television, which over the years has gone from black and white, to colour to high definition.
The other type of innovation is radical or disruptive, where something changes an industry entirely and creates a new market.
含羞草研究社淭he two biggest trends in technology and innovation are FinTech, which is financial technology, and mobile,含羞草研究社� said Crowell
含羞草研究社淏itcoin is trying to play a role in FinTech but the banks are moving into the technology space very quickly. Mobile is changing everything because everything is happening on our phone and its disrupting every single industry.含羞草研究社�
Crowell said major companies are now fully researching ways to radically innovate and change themselves by creating divisions that are tasked with thinking outside of the box, trying to find the innovation before they are disrupted by an outside company.
含羞草研究社淭o radically innovate, some of the really big companies actually create divisions within their own company and have them work on projects that are separate from what they do,含羞草研究社� he said.
含羞草研究社淭o radically innovate, you need to be thinking so far outside of the box and sometimes in these large companies it含羞草研究社檚 very hard to change.含羞草研究社�
Some of the big banks have taken on this philosophy.
Scotiabank announced in October what it called a 含羞草研究社渟ignificant milestone含羞草研究社� with the development of a Digital Factory designed to deliver digital innovations and solutions for the bank含羞草研究社檚 customers.
The factory will house more than 350 jobs for top technology talent that the bank says 含羞草研究社渨ill play a leading role in redefining banking for the digital age.含羞草研究社�
Still, people who believe in Bitcoin feel that change is coming in the world of currency.
含羞草研究社淏itcoin has the power to disrupt the banking system,含羞草研究社� said Merrill. 含羞草研究社淚t含羞草研究社檚 a powerful idea and a fascinating technology. As a currency it含羞草研究社檚 a big idea.
含羞草研究社淥ne-third of the world含羞草研究社檚 population is what含羞草研究社檚 called unbanked: People who don含羞草研究社檛 use banks. But Bitcoin can deliver payments to everyone含羞草研究社檚 phone.含羞草研究社�
含羞草研究社⑩赌⑩赌�
There is conspiracy theory in this story as well.
Several people contacted to discuss Bitcoin or blockchain technology wouldn含羞草研究社檛 talk on the record about it.
One financial adviser with knowledge of virtual currency, called blockchain technology important but Bitcoin a bit too flaky to put his name behind.
含羞草研究社淭here is so much noise around this subject right now,含羞草研究社� he said.
含羞草研究社淲hat含羞草研究社檚 really interesting is how this is going to impact the conventional players.
含羞草研究社淰isa and MasterCard have spent tons of money on this. Major (financial) clearing houses are now taking and receiving payments using blockchain. The potential to reduce costs is huge.含羞草研究社�
A Kelowna man who was looking to purchase Bitcoin and send it overseas, avoiding the large fees normally associated with having to send money through Western Union or PayPal, also didn含羞草研究社檛 want to give his name when speaking about Bitcoin and why he was looking to use virtual currency.
含羞草研究社淚 just don含羞草研究社檛 want my name associated with this,含羞草研究社� he said.
Several Kelowna banks contacted for comment couldn含羞草研究社檛 provide clarity on the future of virtual currency vs. traditional banking, with one vice-president of finance saying he didn含羞草研究社檛 know enough about the issue to comment.
Scotiabank was able to provide comment on the blockchain technology after the request went to its communications department in Toronto.
含羞草研究社淪cotiabank believes that distributed ledger technology including blockchain is a powerful and exciting platform that can be leveraged to improve the customer experience,含羞草研究社� the statement read.
含羞草研究社淲e have a dedicated team focused on exploring the technology and how it can be used within the bank as well as with our customers. As part of this exploration, we have joined the r3CEV consortium and are working with others in the industry on if and how banks can change the way they operate and interoperate.含羞草研究社�
Proponents of Bitcoin say the technology could allow people to cut ties with the current, mainstream financial system and lead to so much more individual power.
含羞草研究社淏itcoin leads to a freedom movement, like the 含羞草研究社楢nonymous含羞草研究社� movement,含羞草研究社� said Merrill.
含羞草研究社淏itcoin gives everybody the ability to be their own bank. There含羞草研究社檚 no third party. There含羞草研究社檚 no banker, no bureaucrat, no government. If we take those three out of the equation, how much money would we save?含羞草研究社�
含羞草研究社⑩赌⑩赌�
In the end, Bitcoin proponents say it含羞草研究社檚 a viable alternative to the traditional banking system.
As a way to send money overseas it gives users an option with low fees compared to what含羞草研究社檚 out there now.
For merchants who can suffer great losses in charge-backs from credit card companies if they happen to process a stolen credit card without knowing, Bitcoin eliminates that.
It has a finite supply with only 21 million Bitcoin ever to be released, meaning more Bitcoin can含羞草研究社檛 be manufactured out of thin air. Could it disrupt the banking industry as we know it, or will the banks adapt and find uses for the blockchain and keep the majority of its customers? And where the heck is all this debt going to end?
At this point there seems like more questions than answers.
含羞草研究社淲e含羞草研究社檝e seen this through history, when you create money out of nothing, the value eventually goes to zero,含羞草研究社� said foreign exchange trader Derrick Nicholson.
含羞草研究社淓very currency in the world that didn含羞草研究社檛 have some sort of backing behind it, not just paper assets, has gone to zero.
含羞草研究社淲hether it含羞草研究社檚 Bitcoin backed by gold or we go back to the gold standard, I含羞草研究社檓 not sure. But what we have today is just not working.含羞草研究社�
