Matthew Lynn on BitCoin, Amazon, and other virtual currencies:

We might be reaching the point where virtual currencies start to pose a real challenge to the existing ones: the dollar DXY +0.06% , euro EURUSD -0.04% , yen USDJPY -0.04% and pound GBPUSD -0.78% . Indeed, at the end of last year, the ECB put out a paper warning about the competition from these new currencies. Although still small, the paper suggested they might undermine the credibility of national currencies.

It is not hard to see why central bankers are worried. Right now, virtual currencies are tiny. Hardly anyone is taking them seriously. And yet people are increasingly losing faith with traditional currencies. They are losing value steadily to inflation. And quantitative easing and currency wars mean they are constantly being debased. They are open to alternatives.

Plenty of investors have been turning to gold. Russia and China are building up their reserves, and so are many private individuals. But gold has always had its own problems as a currency. After all, if it was perfect the world would not have stopped using it as a currency. It has irregular supply. And it is as prone to crashes and collapses as any other monetary unit.

There is little doubt there is a demand for virtual currencies. They are, of course, completely untested. But with so much of the world’s business now conducted online there is little reason why currencies shouldn’t be minted online as well.