- Cryptocurrencies are a form of digital money designed to be secure and they don’t need banks to issue them.
- Bitcoin was the first such decentralised currency.
- More and more businesses, large and small, accept bitcoin payments every day.
- Over 900 newer coins like ethereum, Zcash, litecoin and Ripple have sprung up.
The world’s top central bankers have been gathering in Wyoming, US, last week for their annual Jackson Hole Economic Policy Symposium to discuss important global economic challenges.
As the world slowly moves away from the loose monetary policy that was put in place in the aftermath of the financial crisis, there’s a sense that the economy is entering a new, digital phase. So the next generation of central bankers might have to deal with issues such as the regulation of cryptocurrencies, which are rapidly gaining popularity.
This month, bitcoin, hit an all-time high. The price of the world’s most well-known cryptocurrency has soared from less than $20 in 2012 to around $4,000 currently.
Cryptocurrencies, unlike loose currency, are created using digital technology called blockchain, a borderless, anonymous way of using and creating online money. But most importantly, it’s completely decentralised. No one person has total control, so no banks. It’s value comes from the network of people using it.
So is the world headed towards a cashless economy? And is the world ready for a cryptocurrency monetary system?
I don’t think [digital currencies] will ever replace the system, but I do think it will give us the option of holding our monetary authorities to a higher standard than just being able to do what they want with our money.
“Everyone’s a little bit nervous about a technology which ultimately has the potential to make dramatic changes to the financial system, in particular, its potential use for tax evasion and money-laundering,” explains Llew Claasen of South Africa-based Newtown Partners.
However, a recently published report by the European Commission suggests that “in reality, there’s not much illegal activity happening using these kinds of technologies. They’re transformative and more about financial inclusion than they’re about creating harm,” says Claasen, who’s also the executive director of the Washington-based Bitcoin Foundation, a nonprofit corporation that wants to promote the use of bitcoin money for users around the world.
Asked about bitcoin’s soaring prices, Claasen says that “while there’s certainly enough evidence to suggest that bitcoin is worth $4,000 … it’s still a high-risk asset to have … By the end of the year, we’re expecting bitcoin to go up to about $5,000 and high volatility to continue. So, if you’re going to buy, I would suggest that you buy small amounts of bitcoin using money that you’re quite happy to lose and to hold on to those bitcoins for as long as possible and not engage in short-term trading, which will be very high-risk.”
According to Claasen, it is unlikely for paper currency to be completely replaced by digital coins, but “it gives us a choice. Right now, we have no control over what central banks do with money supply … so it gives us another option – aside from gold – that we can easily move.”
“So, I don’t think it’ll ever replace the system, but I do think it will give us the option of holding our monetary authorities to a higher standard than just being able to do what they want with our money.”
Also on this episode of Counting the Cost:
Artificial intelligence: Staying in the digital economy, some experts believe artificial intelligence (AI) is developing at such a pace it’s leaving government regulators behind. This week, a group of AI founders called for a ban on the technology’s use to design weapons. That call is to prevent the sort of nightmare scenarios previously confined to science fiction, as Yaara Bou Melhem reports from Melbourne.
Samsung troubles: The heir of the world’s biggest smartphone maker and one of the most profitable chip makers has been found guilty of corruption. Samsung heir Jay Y Lee has been sentenced to five years in prison in South Korea. The conviction raises questions about the future of the country’s powerful conglomerates known as chaebols, as Kathy Novak reports.
Afghanistan’s economic future: Seven months into his presidency, US President Donald Trump has recommitted the United States to fighting the Taliban in Afghanistan. The US’ longest war has dragged on for nearly 16 years and has claimed more than 100,000 lives, cost the US more than $700bn, and left the Afghan economy in tatters. So what does the economic future look like for Afghans struggling to escape poverty, loss of livelihoods and insecurity?
Money festival: There was a financial focus at this year’s Edinburgh fringe festival in Scotland. A show based around banking and economics is taking centre stage, as Charlie Angela reports from Edinburgh.
Source: Al Jazeera