Tim Draper Says Banks Are 'Hugely Threatened' By Bitcoin
Tim Draper is a well-known name in Silicon Valley. A partner at VC firm Draper Fisher Jurvetson and prominent backer of Internet startups like Skype and Hotmail, Draper has helped show just how powerful the Internet can be for the US economy.
Today, Draper is just as enthusiastic about bitcoin, and his sprawling complex located in downtown San Mateo, California, could be considered a central hub of US bitcoin innovation.
The site is the headquarters of the Draper University school for entrepreneurship, which is developing a 'Bitcoin 101' course, the monthly BitPanel event as well as Boost VC, an incubator run by his son Adam Draper that boasts 17 bitcoin startups in its current batch.
Further, Hero City is located in the same facility, a co-working space where startups migrate after graduating Boost VC or other Silicon Valley-area accelerators.
Unsurprisingly, Draper told CoinDesk he believes there is a gigantic market opportunity for bitcoin as a financial technology:
“I think that there's a really good market for transparency in finance, and I think bitcoin allows that.”
Discovering digital currencies
Draper told CoinDesk that he had long been looking for an opportunity to get involved with virtual money, preceding even the bitcoin era.
His first real exposure to virtual currency was in Korea in the early 2000s. There, South Koreans were already playing online games and using virtual currencies to buy things like in-game swords or other digital items.
Draper described his fervor and ambition to get involved with virtual money:
“I got excited about it. I kept looking around for an opportunity to create virtual currencies in games or whatever, and never found one where I was really jumping up and down.”
Later, Draper would learn of bitcoin, a virtual currency not restricted to any game or online world.
“[Bitcoin] was the first one that actually opened [virtual currencies] up to everybody,” Draper said. “It made it something you could build an ecosystem around.”
Draper’s first investment was in CoinLab, an early and still active company in the space that is attempting to make digital currencies more accessible.
Despite seeing the potential in South Korea early on, Draper said that his son Adam was actually the first in the family to jump on the bitcoin bandwagon.
He also added:
“[Adam] funded Coinbase, and I passed. Stupid, but ...”
Recognizing the phenomenon
Perhaps most notably for the digital currency's investors, Draper is not backing down from his prediction that 1 BTC will hit $10,000 within three years.
Draper is one of the most prominent investors in bitcoin, and was famously the highest bidder for a lot of almost 30,000 BTC seized from defunct online black market Silk Road at a government auction this summer.
“I think it’s a big and exciting time. I think we’ve got great things happening. I said three years, $10,000. I believe it,” Draper said.
Core to this belief, he says, is that he can see from his office in San Mateo the beginnings of a booming bitcoin industry:
“People are building real infrastructure around it, and it’s doing real work. It is speeding up currency velocity around the world. The movement of bitcoin is faster than the movement of any other currency. If you can speed up the currency, you can make the world wealthier."
Still, if bitcoin is at such a high valuation in the future, there is the argument that everyday consumers will be dissuaded from using it.
However, Draper disagrees:
“They’ll probably measure it in satoshis or in smaller units. They won’t really think in terms of bitcoin. A $10,000 bitcoin, nobody’s going own a full bitcoin.”
Tapping a global potential
Draper told CoinDesk he decided to purchase all of the bitcoin at auction because of its potential to compete with fiat money around the globe.
“I invested to create an opportunity for international markets to thrive where there are bad currencies,” he noted
The use case for bitcoin in underdeveloped economies might be different than in the US or other developed nations. For example, bitcoin may face challenges with competition by the dollar in America because it is widely considered a strong currency.
Even so, Draper is a strong advocate for US regulators warming up to bitcoin, saying:
“I think the US better grab this opportunity. A light touch governance will allow bitcoin to be an enormous success here in the US the way the Internet was an enormous success.”
The consequences of not seizing the moment for bitcoin in the US could be dire, according to Draper.
“The US has to allow bitcoin to thrive here,” he said. “Or we’re going to be stuck with antiquated currency, we are not going to have the benefit of the jobs and wealth that’s created around bitcoin.”
Fixing banking issues
Still, despite the technology's promise, some bitcoin startups have expressed exasperation at the difficult banking situation they face. Draper said he understands why banks are behaving in this manner.
"It’s not in their best interest," he said. "Banks make a ton of money on credit cards, on wire transfers. They are hugely threatened. So they don’t want to bank bitcoin. They are kind of trying to hold the line."
However, Draper was adamant that banks will ultimately pay the price for their slow adoption of bitcoin, stating:
"If I were a bank, I’d buy a bunch of bitcoin. You have two choices: In effect have the train run just right into the wall, or you can change the wall. You go out and buy some bitcoin, you start banking bitcoin, and you start getting in front of it. You start creating new services with bitcoin. The banks who do are going to win."
"The banks who don’t are going to go the way of the buggy manufacturer," he added.
In Draper's mind, there's simply no turning back now. Bitcoin, he believes is here to stay. He concluded:
"There are real businesses transferring real money through bitcoin and they are getting more and more used to it – cheaper, faster, better."
Images via CoinDesk and Slate
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