!16 investigation of the economic implications of Bitcoin. Even more paramount is the potential for Bitcoin to change our perception of how a currency “should” or “needs” to operate. In the next section, this paper will attempt to outline the economic implications of Bitcoin, with focus on its implications for GDP, employment, and central banks and their monetary policy. III. Economic Implications of Bitcoin A. GDP and Employment Having established Bitcoin and bitcoins as a quasi currency, it is now time to shift the discussion towards what kind of impacts both Bitcoin and bitcoins can have on economies at both the national and global levels. This analysis will draw from a multitude of different sources including: a recent book published on the subject; commentary from economists, central bankers and their central banks; and articles from academic journals and reputable news outlets. One must keep in mind that entire books have been written on this subject. This paper will focus primarily on the implications of Bitcoin and bitcoins on monetary policy while also observing the potential effects on GDP7 and employment in the United States. The potential implications of Bitcoin and bitcoins are undoubtedly momentous, but the puzzle of if and/or when these immense effects manifest themselves is a subject rampant with controversy and uncertainty. However, the literature agrees that the payment processing potential of the technology behind Bitcoin is much more likely to have a longstanding impact than bitcoins as a currency. Gil Luria, an analyst for Wedbush Securities has done extensive research on the potential impacts of crypto currencies on economies worldwide. He has argued that approximately 21 percent of the American GDP comes from what he dubs as “trust industries”, otherwise known as the financial and banking industries. Bitcoin technology, also known as the blockchain technology that performs the “middlemen” tasks that are currently carried out by the banking sector, will largely digitize and automate these processes (Vigna and Casey 2015, 286). As the Boston Federal Reserve Bank notes “The current system that performs the essential functions of enabling transactions is fragmented, sometimes even within the same bank, and inefficient” (Lo and Wang 2014). Luria’s estimate is based on data from the Bureau of Labor Statistics, encapsulating commercial banks, securities industry firms, funds and trusts, insurance providers, real estate agents, and legal services, a group that employed over 10 million Americans in 2014. While he does not expect that these jobs will simply disappear overnight, he argues that as these industries begin to adopt Bitcoin technology, these jobs will start to disappear gradually (Vigna and Casey 2015, 286-287). 7
Gross Domestic Product