Three Reasons Why You Can’t Buy Much With Bitcoin - Yet

​“Do you own Bitcoin?” “Should I invest in Bitcoin?” “What makes Bitcoin different from Ethereum?” “Is Bitcoin really anonymous?”

​You’ve probably asked or been asked one of these questions over the course of the past several months. And with all the buzz around Bitcoin and other cryptocurrencies, many have started to wonder when they’ll actually be able to jump in and start using Bitcoin to buy anything from coffee to a new television to a house.

​The tide has already started to turn: Starbucks recently partnered with iPayYou to allow consumers to pay with Bitcoin in the Starbucks app. But don’t expect to see a huge wave of other companies joining them anytime soon. There are several key issues that stand in the way of broad-based consumer adoption of cyber currencies.

​First, the massive fluctuations in the value of cryptocurrencies against fiat currencies like the dollar make it unattractive for consumers and companies alike. On the consumer end, there is massive potential for loss in buying power of their virtual currency wallet; on the corporate end, there’s no reason to accept currency that could be worth nothing tomorrow.

​Second, cybercurrency exchanges are attractive targets for hackers. Just recently in Japan, digital thieves stole $530 million of a cryptocurrency known as NEM. A similar event happened in 2014, when around $400 million in Bitcoin was stolen from MtGox, a cybercurrency exchange in Tokyo. And these are far from isolated instances: according to one recent study, about a third of Bitcoin exchanges from 2009 to March 2015 had been hacked.

​Third, at the end of the day, electronic currencies don’t always work. Even credit and debit cards have their issues, and many people like the security and anonymity of printed money. This is particularly true in Western nations, where largely stable national currencies mean that people tend to value their cash and actually use it.

​Even granting all these concerns and challenges, however, it seems plausible that adoption of cryptocurrency will grow over time. In fact, some countries, including India, China, and South Korea, have already acknowledged and started to regulate them. Such shifts have prompted the International Monetary Fund (IMF) to ask for regulators to come together and address the phenomenon – and soon. According to IMF Managing Director Christine Lagarde, cryptocurrences could well surprise governments and give national currencies a ‘run for their money’ if regulators do not act fast.

​Cryptocurrencies combine the convenience of electronic transactions with the anonymous nature of cash, and they eliminate the problems of exchange rates across national borders. There’s a reason people like them, in other words – but until the regulatory and security vulnerabilities of cryptocurrency exchanges are addressed, keep buying your Starbucks with card or cash.