If the Barclays Emerging Payments Forum wasn’t on the radar of bitcoin enthusiasts coming into the week of 24th March, all this changed when SecondMarket and Bitcoin Investment Trust CEO Barry Silbert sent out a tweet that quickly reverberated throughout the community on social media.
Silbert indicated on Sunday, 23rd March that 38 institutional investors representing more than $250bn in investment capital were to meet with him at the event. The topic? Bitcoin and the future of digital currencies.
Requests from 38 institutional investors representing +$250 billion to meet with me re bitcoin at Barclays Emerging Payments Forum tomorrow
— Barry Silbert (@barrysilbert) March 23, 2014
But Silbert, who spoke twice at the event himself, indicated the conference also reflected the increase in awareness about bitcoin and its potential to disrupt the established order in the payments industry
The investors he met with, Silbert said, had three objectives: to learn more about bitcoin, to better understand how to invest in the ecosystem, and lastly, to find out how their existing investments could be threatened by the ascent of bitcoin.
In conversation with CoinDesk, Silbert revealed it was perhaps this last objective that intrigued him most. He noted that a lot of the investors he spoke to were involved in the public market, and that they tended to have positions in companies like MasterCard, MoneyGram, WesternUnion and Visa.
“They were all trying to figure out what effect digital currency was going to have in their holdings in one or all of those incumbents.”
The result was that Silbert painted the picture of an industry that, while still on the fence about bitcoin’s ability to gain mass adoption, is preparing seriously for such an outcome.
The meetings by the numbers
Silbert’s assessment was that many of the investors he met with have yet to decide whether they believe digital currencies will have a bright future in finance.
Silbert explained how he replicated an experiment he routinely performs during his speeches at the meetings, asking the investors to tell him whether they were skeptics, believers or still waiting for more information to decide their feelings toward the digital currency ecosystem.
“Of all the folks that I met with, 21% were skeptical, 15% were believers. The rest – 64% – were still learning.”
The results surprised Silbert, particularly the low number of skeptics. He added: “Usually when I do speeches, I’ll see skeptics skew 50% or higher.”
Of course, he acknowledged that these investors weren’t necessarily indicative of where the payments industry is on the whole. For example, these investors requested meetings with him, and a handful, he said, own bitcoin personally.
Notably, about one-third of the investors Silbert met with have already asked for a follow-up meeting or a follow-up call, and Silbert projects that more may do so in the days and weeks ahead.
Investors list major concerns
In total, Silbert had 18 meetings, some with as few as one investor, others with as many as four. As a result of this extensive process, Silbert indicated he was able to get a sense of why these investors have so far stayed out of the digital currency ecosystem, and the findings are positive for the bitcoin community.
“A lot of them manage money for vehicles that invest only in public companies, and since there are no public ways for them to invest in bitcoin, there has not been an opportunity for them to deploy that money.”
Silbert expects this to soon change, and that the Bitcoin Investment Trust, once it trades on the public market via OTCQX in Q4, will play a key role.
Added Silbert: “Most of them said that [the Bitcoin Investment Trust] would be eligible for them to invest if they chose to invest in bitcoin.”
Yet another reason, however, was that both bitcoin the currency and digital currency companies remain small time compared to their usual investments.
“Some of them are so big that they typically don’t get involved until they can put a minimum of $25m to $50m to work.”
Bitcoin is next Western Union, not Visa
Silbert also received feedback from the investors on what they believe to be bitcoin’s potential to interrupt the payments space. Overall, he said, investors feel that bitcoin threatens established remittance and money order providers such as Western Union and MoneyGram.
“The consensus was that if bitcoin is going to be successful it will have a bigger effect on the Western Union/Moneygram business, whereas people feel like Visa/MasterCard, given the brand and depth of distribution, they see there’s less of a near-term threat.”
Still, it should be noted that replacing these companies will be no small feat. Western Union, has noted it is watching the digital currency markets, no doubt in some small part to see whether it will threaten its $9bn market cap.