By Andrew BurnesThe financial sector is a massive business, accounting for around half of all global trade and a third of all the world’s digital currencies.
Yet it is increasingly under threat from virtual currencies.
The number of virtual currency-related companies and companies with registered capital has risen to a record high of $6.6bn (£4.4bn) according to data from the US-based Bitcoin Foundation.
“This is not just about bitcoin,” said Alex Toth, the foundation’s co-founder and CEO, adding that digital currencies were “a major threat to the financial sector”.
“It’s a threat to everybody.
There’s no such thing as a bubble, there’s no bubble, a bubble is a bubble.”
In August, the virtual currency industry suffered a major blow when Mt Gox, the world-leading Bitcoin exchange, was forced to close down amid a massive ransomware attack.
Since then, the number of Bitcoin companies has surged to more than 5,500, including Coinbase, a San Francisco-based bitcoin exchange, and Bitstamp, the second largest.
Bitcoin is not the only digital currency to have suffered from a ransomware attack and it is not likely to be the last, said Nick Johnson, a partner at law firm Gibson Dunn.
The virtual currency world is “now a massive threat to every aspect of the financial system, whether it’s derivatives, credit default swaps, or derivatives,” he told the BBC.
“Bitcoin is now in the business of creating a digital currency that has been linked to terrorism.
It’s a very volatile currency.”
The virtual currencies boom is part of a broader global phenomenon that has seen an explosion of new companies using Bitcoin and other virtual currencies to make payments and exchange value for goods and services, such as mobile phone bills.
The latest example of this is the surge in the value of virtual currencies in emerging markets, which have seen the number and size of companies offering services to Bitcoin users soar.
This week, India became the first country to allow Bitcoin transactions to be accepted at official payment terminals.
The number of businesses offering services in virtual currencies has risen by more than 50 per cent in the last five years, according to research firm eMarketer.
The growth of the virtual currencies market has been fuelled by the boom in the number in use.
According to data compiled by digital currency analytics company Coindesk, Bitcoin was used for a record $3.6 trillion worth of transactions in 2017, the biggest volume in the world.
That figure was almost double the value for all of the other cryptocurrencies tracked by eMarketers, the data company said.
Bitcoin, a peer-to-peer digital currency, was invented in 2009 by an anonymous developer and is based on the cryptographic protocol Bitcoin.
It uses a mathematical system called “mining” to secure transactions on the Internet.
It has become a global phenomenon with an estimated $60bn in market capitalisation.
The value of Bitcoin has grown by a third in the past year, according eMarkets data.
In India, virtual currency transactions accounted for more than $3 billion in the country’s fiscal year that ended in September, according data from Coindezk.
In China, which is home to around half the world total economy, Bitcoin transactions amounted to about $10.6 billion in fiscal year 2017, according figures from Co-operatives China.
In the US, the value has soared by more more than 300 per cent since the beginning of the year, to $3,934.23, according the website CryptoCompare.
In August 2018, the US Treasury Department published a report that found that virtual currencies were a “potential threat to national security”.
The report, titled “Virtual currencies and the potential threat of cybercrime: An evaluation of the available evidence”, said that the rise of the Bitcoin market posed a “direct threat to US national security interests” because of the way that it “cannot be tracked or monitored”.
The Treasury report said the emergence of Bitcoin was “potentially disruptive to the international financial system and could pose a significant threat to global economic stability”.
“Virtual currencies could be used to facilitate illicit activity, money laundering, cybercrime, or other illicit activity,” the report said.
“While the use of virtual coins is not illegal, they pose a potential risk to the integrity of the international banking system and international financial institutions and may undermine international financial markets.”
In addition to the threat of virtual-currency attacks, bitcoin has also attracted a number of scandals.
In March, an exchange in New York City was raided by authorities over alleged violations of state anti-money laundering laws.
The New York Police Department and New York State Attorney General’s Office said the exchange used virtual currency to buy and sell illegal goods, and that some of the transactions were illegal under New York law.
The Bitcoin Foundation said in a statement that it was “extremely concerned about the ongoing rise in the virtual coin markets” and called for