A cryptocurrency is a virtual (digital) currency that makes use of cryptography to secure its transactions. This security makes it practically impossible to be counterfeited. More importantly, cryptocurrencies have no central authority, hence, it is theoretically immune to government manipulation or interference, or at least we’ve been told that’s the case. Bitcoin is, perhaps, the first cryptocurrency to capture the public’s imagination. However, an overwhelming majority of people have no knowledge of cryptocurrencies. Cryptocurrencies have baffled everyone – even leading politicians. As rightly put by Thomas Carper (US Senator): “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.”
Despite the skeptical attitude that many governments around the world took earlier on towards cryptocurrencies, some world leaders are now taking surprising positive turns. Some central banks and governments have been going easy on cryptocurrency regulation – and even expressing interest in creating their own digital currencies! Though some have become more strict. Major economies including Japan, China, Sweden, Russia, and even the US could be just months or years away from issuing sovereign digital currencies (some may, or may not, become more strict on general cryptocurrencies once this is done). World leaders are in fact viewing the blockchain technology behind cryptocurrencies as a way to move forward or even get ahead of the trend.
The skyrocketing popularity of digital currencies left governments and central banks with no option but to start experimenting with their own versions of digital currencies. Now let us explore countries that are leading the way:
Estonia is in the process of creating a state-backed cryptocurrency called the ‘estcoin.’ According to CNBC, Estonia’s cryptocurrency will be launched just like other digital currencies – in a crowdfunding version. Estonia is well known for digital innovations. It was the first country in the world to offer ‘e-citizenry’ to its citizens. According to the country’s managing director at e-residency, Kaspar Korjus, the initiative will see the small Eastern European country develop a ‘borderless digital nation.’ The Estonian president recently explained that his government will keep innovating so as to maintain relevance in the digital era.
In January 2017, the central bank of China announced that it had completed a trial of a digital banks acceptance exchange. The trial test sought to reveal technical, logistical, and the economic challenges involved in deploying cryptocurrency. This effectively pushed it closer to being the first central bank to explore and test its digital currency. According to Tsinghua Financial Review, China’s cryptocurrency could be integrated into the legacy banking system with commercial banks left to operate digital wallets.
China’s cryptocurrency is aimed at scaling the number of daily transactions made throughout the country.
The Japanese are also said to be looking into their own cryptocurrency, the J-coin. The cryptocurrency will be pegged to the country’s legal tender, yen, and users will be able to spend it using a mobile app. Mizuho Financial Group is among the institutions overseeing its creation. The financial times had reported that the Japan Post Bank and a pool of other banks are involved in this development which is scheduled for launch before the Tokyo Olympics in 2020. The Japanese government has continually been open to digital currency ideas; early last year, the government legalized Bitcoin as a legal payment method.
Sweden is on course to becoming the first cashless country in the world. A Stockholm based Industrial Economics and Management researcher had earlier said that cash was no longer important in Sweden, unlike many parts of the world. Amazingly, 900 out of 1,600 bank branches in Sweden no longer accept cash deposits. Due to this trend, Sweden’s central bank is considering to introduce a government-backed digital currency known as the E-krona. However, the country’s major concern is the possible exclusion of the ‘unbankables’ who do not own a smartphone or bank account. The county’s technology players had also hinted their commitment to transform the land registry in Sweden to the blockchain.
The Bank of England paired with blockchain and artificial intelligence specialists to keep up the pace in the fast-changing financial sector. Last year, the bank partnered with Ripple to test a blockchain based technology designed to ease cross-border payments. According to the chief executive of Barclays bank, Ashok Vaswani, it is “really, really important for London to stay at the forefront of fintech”.
In late September last year, the Central Bank of Uruguay announced a new digital currency pilot. The Banco Central del Uruguay (BDC) which used a limited number of users to test a mobile-based funds-transfer system. While speaking at an event themed “The Future of Money and the Financial System,” Mario Bergara, the president of BCD, stated that the planned digital currency will function like cash, facilitating transfer of balances from one individual to another. However, it remains unclear whether the digital currency will run on blockchain technology.
Kazakhstan expressed plans to enter the blockchain market with a digital currency pegged on the country’s fiat currency. Kazakhstan’s government-supported Astana International Finance Center (AIFC) had earlier inked a deal of cooperation with Maltese firm Exante. Both parties are reportedly working together to develop the nation’s untapped cryptocurrency market. This move could be reinforced by the new blockchain platform developed by EXANTE-Stasis.
According to president and CEO of the Federal Reserve Bank of New York, Willium Dudley, the Federal Reserve is exploring the idea of creating its own digital currency. However, he said the plan could be in its early stages and “very premature” to speculate when an offering could be issued. We could see the US soon following in the footsteps of several countries which have indicated interest in their own digital currencies.
According to announcements by local media outlets in Dubai, the government officially launched its own cryptocurrency called enCash. The cryptocurrency would be accepted as a legal tender for a range of government and non-government services such as money transfers, school fees, and other daily utilities. The government in Dubai is strongly pro-blockchain and considers it as the next wave of paradigm shaping technologies. As a result it wants to fast-track its adoption. With a deal signed to allow property sales in Bitcoin, Dubai seeks to become the eastern world’s fintech hub.
Venezuela is soon launching a cryptocurrency backed by 5.3 billion barrels of oil valued at $267 billion so as to offset a far-reaching financial crisis. The country’s “president” Nicolas Maduro shocked the world by announcing the ‘petro’ currency which will be backed by oil, gas, diamond reserves, and gold. The government is keen to offset the slip in Venezuela’s currency which lost 97% against the US dollar, in the wake of yet another failed socialist state. Will the new crypto be used for the starving citizens of Venezuela, or to line the pockets of a few politicians? Time will tell.
These were all that we could find for the moment. Malaysia, Indonesia, nor Thailand seem to have any plans for such a move at the moment, and the former two have become more strict towards Cryptocurrencies. Also, for the sake of time, we were not able to include Russia, who is also planning their own cryptocurrency.
The emergence of government-backed cryptocurrencies will see cryptocurrencies gain widespread acceptance. Ultimately, cryptocurrencies will become more entrenched in the mainstream financial systems. For many though, the idea of a government backed cryptocurrency defeats crypto’s main purpose, and some believe that it could play into a dangerous (and prophesied) one-world government. However, at the same time, we realize the benefits that centralized, government-backed cryptocurrencies could serve, being much faster and more convenient than traditional methods, they could greatly complement payment methods within the government and among citizens. And yet still, traditional cryptocurrencies could continue to be of great economic value, such as they have been in Japan. All that’s needed is proper regulation to help ensure safe practices. Governments can work with cryptocurrencies to help boost the nation’s wealth and prosperity. Blockchain technologies will shape the future, and governments should embrace them if they want long-term innovation and growth. We’re always open to work hand-in-hand with the government to come up with a better solution that benefits both parties. Being a blockchain-based company, we’re willing to offer advice and help with our expertise in the field. Our products are simply digital versions of gold ownership, that could help citizens and governments alike in gold investing, and being a blockchain-based company, we work hard to be compliant with government regulations. We’re here to offer our services and be part of a positive change for the country. It’s normal that when new innovations come there is a sort of battle that can take place, but now it’s time for some quality regulations that will help implement this useful technology for the benefit of all. It’s our hope that 2018 will bring a lot of good regulations concerning cryptocurrencies and blockchain technology, that will encourage growth and innovation.
In these exciting times, it can be a good idea to have some precious metals in your portfolio. DinarDirham offers digital gold products on the Ethereum blockchain, and our sister company Blockchains.my is a secure and advanced, multi-asset, digital wallet app for your convenience.