Today, the value of the Bitcoin and other virtual currencies is based on the comparative anonymity of the transactions, which they allow. When states step up their supervision, or create their own virtual currency, this advantage will disappear, according to the Harvard University Professor of Economics and Politics, Kenneth Rogoff.

“Is actually the Bitcoin the world’s biggest bubble or a very good modern investment in the new era of financial technology? My intuition tells me that in the long run the technology will develop, but the cost of the battle will collapse”, writes Rogoff in his analyze.

At a level of over 7,500 USD in early November the virtual currency is now more than three times more expensive than an ounce of gold. Some defenders of the idea for the Bitcoin predict that its price will jump in the coming years, exceeding even 10,000 USD.

What will happen next will depend, to a large extent, on the way governments will respond. Will they tolerate anonymous payment systems that facilitate tax evasion and crime? Will they create their own digital currencies? Another key issue is to understand with what success the multiple competitors of the battlefield can penetrate into the market.

In principle, it is extremely easy to clone or improve the technology of the Bitcoin. It is more difficult, however, to duplicate the Bitcoin’s leadership when it comes to the reliability of the large environment of applications built around it.

Currently, the regulatory environment remains very chaotic. The Chinese government is worried that usage of Bitcoin can cause capital leak and tax evasion, so recently banned the exchange of virtual currency. Japan has registered the crypto-currency as a legitimate payment instrument, in an apparent attempt to become the global center of financial technology.

In Silicon Valley, the managers are investing in the Bitcoin, and at the same time pouring money into their competitors. The most important among them is Ether (or Ethereum). Its ambitions are great, comparable to those of Amazon. The aim is that Ether customers use the same common technology to negotiate and conclude “smart contracts” for virtually everything.

At the beginning of November, the stock market capitalization of the Ethereum amounted to 30 billion USD, far behind the Bitcoin, which has market cap of 124 billion USD. Ripple – a platform supported by the banking sector to reduce transaction costs in interbank and foreign transfers, is far behind by 9 billion USD of market value. After the first three, there are dozens of new competitors, but their share is relatively small.

Most experts agree around the belief that smart technology behind virtual currencies can be widespread in cybersecurity, which is one of the biggest challenges to the stability of the global financial system. For a large number of developers, the goal of making a cheaper and more secure payment mechanism has shifted the ambition of the Bitcoin to replace the dollar.

However it is crazy to think that the Bitcoin will be able to replace the currency issued by a central bank. One thing is for governments to allow small anonymous transactions with virtual currencies and another is large scale anonymous payments, which could make it extremely difficult to establish tax liabilities and control criminal activity.

It will be interesting to see how Japan’s position will evolve. The government has indicated that it will monitor commodity transactions to watch for criminal activities and gather information about people in the virtual currency.

However, we can be sure that global tax evasion will look for ways to acquire Bitcoin anonymously abroad, and then wash money through Japanese accounts. By adopting virtual currencies, Japan risks becoming a tax haven from the scale of Switzerland – with technology-related bank secrecy laws.

If the Bitcoin is removed from its almost anonymous state, there will be a risk that its current price and will be difficult to justify it.

Finally, it is hard to see what would prevent central banks from creating their own digital currencies and using regulations to tilt the balance to their advantage as they win the race.