Twenty venture capitalists gathered in Silicon Valley last week to discuss the impact of blockchain technology, including digital currency, on financial services and venture capital. The 20 VCs represent an equal number of funds, which invest–or are looking for investment opportunities–all over the world, including the third world. They represented a diverse group of perspectives, with some having regulatory experience, some having experience with conventional payment mechanisms and some with innovative mechanisms such as PayPal. Even their disagreements were instructive of the uncertain future of blockchain technology and its various potential applications.

The consensus is that digital currency is entering a nuclear winter. A majority of Initial Coin Offerings made in 2017–perhaps as much as 75%–turned out to be fraudulent and have no value today. Not coincidentally, the vast majority of Initial Coin Offerings originated in Eastern European countries that are home to spam and bot farms…and where there is little, if any, regulatory oversight.

To the extent bitcoins may become a viable, commercial technology for B2B transactions, it is likely to occur in a technology hub in the U.S. or Europe. Those hubs have the talent, the infrastructure and the robust regulatory structures that can be adapted to ICOs and create the trust necessary to make digital currency a positive, viable alternative to government currencies. In fact, the centralization of technology talent in the U.S. is depriving the rest of the world of talent.

The attempts of island states, like Bermuda, Malta, Cyprus, the Isle of Mann, and even Singapore to draft regulations that facilitate the creation of bitcoin issuers on their soil is unlikely to have a significant impact. Nobody who is experienced and seriously intends to build a global digital technology company and change the financial services industry on a global scale will think one can create the necessary large organization on these islands. These islands do not have an ecosystem of sophisticated VCs and do not have a critical mass of talented engineers. The island states are going for broke because they have so little to lose. When and if the technology matures, U.S. companies will step in and crush competitors based in these islands.

A self-described “payment geek on the corporate side,” whose job it is to look at emerging technologies to enhance the customer experience of both merchants and consumers and their acceptance of payment mechanisms, does not see blockchain technology as providing the immediacy, transparency and security required for commercial transactions, at least in developed economies. The current system for moving money around the world for payments is inexpensive and secure, so there is no great impetus for large corporations to switch to digital currency. Digital currencies are expensive to use–last year the cost per transaction was $60–but are still subject to loss and theft.

Digital currencies are also not capable of applying internet technology, especially the interoperability effect. They are missing the abstraction layer, where if you are building on the internet, it does not matter what device or network you are connected to.

To reduce the cost of digital currency transactions, there must be more competition in currency creation, all subject to a common protocol, which has yet to be developed. One participant opined that to become competitive, a Fintech company must first achieve scale at any cost–i.e. even if not profitable–and then be nimble in searching and finding a viable business model. While it is difficult to make money on payments, it can get you scale and the opportunity to make money on extending credit.

Even in India, where the government wanted to get away from a largely cash payment system that it cannot control and tax, the movement is to the wallet space, rather than the digital space, where it can be coupled by the unique ID the government has assigned to each citizen.

Bitcoins are not a good vehicle for money laundering, as the blockchain leaves a digital trace as to who owned the coin. The traceability of bitcoin brought down the Silk Road … and the FBI agents who pocketed $700,000 in coins!

Many VCs present believe that the real user cases for block chain technologies are not consumer payments currently, because blockchains do not scale and have high processing costs and challenging usability issues. To build out the fundamental technologies to overcome these limitations will take 5-10 years. Currently attractive may be commercial applications to solve non-financial identity problems, such as the chain of title identity issues that title companies confront or tracking secondary ticket sales to control scalping in entertainment venues.

Recently, companies seeking to raise money were offering investors tokens instead of, or in addition to, equity. Investors, however, have backed off ICOs in favor of equity in return for their investment. Until regulatory compliance is built into tokens/digital securities, so that they can be freely traded on the secondary market, there will be no market for tokens. Venture capitalists still generally prefer equity, because equity is easier to value with some certainty, making allocation of assets easier, and more liquid than tokens, in addition to having ownership or attribution rights. (Some companies offered tokens that were convertible to equity, given the preference.)

As for investing in digital currency companies, one VC noted that 75% of VCs destroy value and that superior returns accrue only to a small circle of VCs who are early stage investors. However, in early stage investing, there is a 40% chance of complete asset loss.

Regulators in the U.S. currently see ICOs as securities offerings and not as utility tokens. The VCs debated whether ICOs should be limited to accredited investors. One VC argued that requiring a $1,000,000 in assets to be accredited is arbitrary, inequitable and undemocratic and that perhaps accreditation should be conditioned on passing some kind of test, so that a smart, young software engineer might be able to get in on the game without $1,000,000 in assets. Another VC said that most Americans have already taken on more risk and debt than they should and that asset based accreditation is prudent to protect the public. He also argued that weak regulation led to the subprime mortgage crisis and the catastrophic loss of homeowner equity that ensued and that strong regulations are necessary to protect the public and build investor confidence.