The writer is chief executive and chief investment officer of Richard Bernstein AdvisorsProof of concept typically means evidence that a design idea is feasible. Cryptocurrency enthusiasts have suggested that the approval of bitcoin ETFs by the US Securities and Exchange Commission this week is substantial proof of concept that cryptocurrencies are viable and marks a big step towards their integration into the financial system. The question, however, is viable and feasible as what?

The primary purpose of currencies throughout economic history has been to facilitate consumption, business dealings and capital investment. Trading, speculating and hedging happen after a currency begins to be widely used and its transactional economic purpose is well established. 

No one actively traded or speculated in the dollar, the pound, the yen or other major global currencies before they were used for economic transactions. The required proof of concept is their economic use. Of course, not all currencies achieve this. Some emerging countries’ inflation rates are so high that locals prefer to use established currencies, such as the US dollar, in day-to-day transactions. Cryptocurrency boosters have suggested that bitcoin might be a preferable option.