Vinny Lingham: Governments will be the largest buyers of Bitcoin in 2017

The rise in Bitcoin prices could lead governments into an unprecedented “race for digital goods” and start stockpiling Bitcoin.

Government reserves of Bitcoin?

Currently, the price of Bitcoin is around $900, with a market value of about $14 billion. This digital currency is often mentioned by mainstream media and has successfully attracted a large number of regular users and investors. However, there is a type of investor that seems to have nothing to do with Bitcoin and is likely to start stockpiling this digital currency: national governments. As early as May this year, Vinny Lingham, CEO of blockchain company Civic, made this prediction.

Although no country has made an official statement on its digital currency reserves, the government may have already acquired some cryptocurrencies for value preservation due to Bitcoin's excellent performance in 2016. Once any government discloses its digital currency reserves, Bitcoin will become the object of competition among governments around the world. After all, no country wants its currency system to become an island of value.

Lingham wrote:

Imagine if China starts buying a lot of Bitcoin, will other governments just sit back and watch? I don’t think so. Therefore, in my opinion, governments will become the largest buyers of Bitcoin in 2017, pushing the price of Bitcoin to new heights.

“Zero risk, high return”

Indeed, perhaps the rise in the price of the currency will not only attract the attention of governments, but also arouse their desire to buy Bitcoin. Bill Barhydt, CEO of Bitcoin payment company Abra, responded to Lingham's prediction on Twitter and agreed with it.

I think some governments will start buying small amounts of Bitcoin to preserve their assets in 2017. After all, this is a zero-risk transaction, and the advantages it brings are obvious.

The zero-risk factor is obvious, because almost all countries’ legal currencies can be used to buy Bitcoin. Although investing in Bitcoin does have risks for ordinary people, governments do not have such concerns because they are familiar with the amount of foreign exchange reserves and can control the currency issuance mechanism.

In addition, Bitcoin is often called "digital gold" because of its similar properties to precious metals, as it can preserve the value of assets during economic turmoil. However, unlike gold, the advantages of Bitcoin reserves are more obvious because it is cheaper and has lower transaction costs.

Secret Buy

Some even believe that this "cryptocurrency race" has already begun in secret, and price manipulation is the first step. The People's Bank of China (PBOC) recently met with domestic exchanges to discuss the regulation of Bitcoin.

After the meeting, the central bank released a document:

(According to a document issued by five ministries in 2013) Bitcoin is a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market. Participating institutions and individuals should be prudent in engaging in activities such as Bitcoin investment and bear the corresponding responsibilities and risks.

It is reported that Bitcoin promotion activities will also be restricted. Chinese regulators have begun exploring how to use cryptocurrencies to circumvent capital controls.

The fermentation of this series of events led to a sharp drop in the price of Bitcoin against the RMB. Because China is the biggest factor driving the development of the Bitcoin market, many mainstream media began to misreport the news that "Bitcoin is banned in China", which is actually a wrong interpretation.

Samson Mow, COO of China’s long-established Bitcoin exchange BTCC, has recently clarified on Twitter:

No, the Chinese government has not banned the use of Bitcoin.

Some people believe that the Chinese government's move is to lower the price of the currency so as to obtain more Bitcoin reserves. However, confidentiality on this topic is also very important.

If Lingham and Barhydt's predictions come true, the price of the currency will surely reach unprecedented new heights. Then Bitcoin will truly become a global, apolitical currency. Bitcoin's public image problem will no longer be a problem.