5.5 Million dollars are converted to bitcoin every half an hour. Do you still think that cryptocurrencies are a bubble which is about to burst? Is dismissal by financial establishments of cryptos as being a fad still forged in iron? Where I stand from it sounds increasingly foolish to dismiss the growing importance of cryptocurrencies in the economic world as a fairy tale. Are we on the threshold of The Golden World of Crypto? Maybe and maybe not and here is why!
BIS Speaks Out For The First Time about the Golden World of Crypto
For those of you who are not familiar with BIS – the International Bank of Settlements it is probably time to get acquainted with what is considered to be the central bank for central banks.
BIS is based in Switzerland (where else?) and was established in 1930. The scope of its work is to “foster international monetary cooperation”.
The mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
BIS is not given to making headlines frequently. Let us say that like in Game of Thrones BIS could be compared to the Iron Bank of Braavos. It is the unshakeable financial institution that lives quietly but ominously. BIS is the power behind the throne. You can, therefore, be easily forgiven if even as a financial guru, you may have never come across this entity.
BIS Quarterly Review – September 2017 – Central Bank Cryptocurrencies
The latest quarterly review by Morten Bech and Rodney Garratt explores the new era of cryptocurrencies. It makes pointed questions. In the light of so many new cryptocurrencies emerging on the market, should Central Banks consider their own cryptocurrencies? How useful is a digital currency to a Central Bank?
“In less than a decade, bitcoin has gone from being an obscure curiosity to a household name. Its value has risen – with ups and downs – from a few cents per coin to over $4,000. In the meantime, hundreds of other cryptocurrencies – equalling bitcoin in market value – have emerged.”
While it seems unlikely that bitcoin or its sisters will displace sovereign currencies, they have demonstrated the viability of the underlying blockchain or distributed ledger technology (DLT). Venture capitalists and financial institutions are investing heavily in DLT projects that seek to provide new financial services as well as deliver old ones more efficiently. Bloggers, central bankers and academics are predicting transformative or disruptive implications for payments, banks and the financial system at large.
Lately, central banks have entered the fray, with several announcing that they are exploring or experimenting with DLT, and the prospect of central bank crypto- or digital currencies is attracting considerable attention.
Translation: BIS is advising central banks to acknowledge the golden world of cryptocurrencies and to take Bitcoin and other major cryptos seriously.
The Future – Should it be about Cryptocurrencies and Blockchain technology?
Whilst admonishing hands keep pointing warning fingers at Bitcoin, and the past may have given them a good reason to do so, there is no question that adopting an ostrich attitude and burying our head in the ground to the development of DLT is not going to be helpful for the future.
Distributed Ledger Technology which is also known as Blockchain technology is the future. It is by far the most efficient and advanced system for safe record keeping. Although the Blockchain Technology was originally built to support Bitcoin – today its scope is far wider reaching than simply to support the decentralized currency.
Understanding Cryptos – Is Bitcoin Really Bad?
Whilst many arguments can be put to the table to and for cryptocurrencies and whether they are really on the brink of a golden era, there is no question that ignorance on the subject is the worst enemy. Lack of knowledge is the worst harbinger of fears. Although there are strong arguments on both sides, making blanket statements for or against decentralized currencies should be based on an understanding of the subject.
Anything that is new and that will potentially change the way we do business is daunting. For most people changing house is a drama they would prefer not to consider. Every time a country changes its currency, it is a harrowing process for its citizens. Eurozone countries would give testimony to that when they changed from local currencies to Euro. But the bottom line is that money is money – a universal language that transcends culture, IQ and age.
Therefore, one cannot be blamed for putting up resistance with a concept that is still obscure in most minds.
However, nowadays Bitcoin, Blockchain and cryptocurrencies are becoming household names with millennials. Ignoring the development of decentralized currencies is as good as twenty years ago, saying that the Internet will never take off.
Bill Gates on Bitcoin: Bitcoin is Better than Currency – A rather strong statement I would say – however, one cannot ignore the validity of the structure on which Bitcoin is built.
Cryptocurrencies and the Future for Payment Transactions
When it comes to a peer-to-peer payment system, with practically no charges, one can certainly think of advantages. The resistance and rigmarole from stiff upper lip banking protocol can only be endorsed from the fear of losing out on huge profits from commissions and charges (amongst other things).
The only real and serious consideration here is the loss of transparency. This is where governments need to step in and place proper regularisation. Not just to keep it legit but also not to lose out on taxes.
What few would know, is that every transaction on a blockchain is forever traceable to the wallet of the recipient. Even when the configuration is changed by splitting the block or transferring coins in full or part. The audit trail is unshakeable. Therefore proper registration of wallets “accounts” would be a solution for transparency.
You may be interested in reading “How to Store Bitcoin”
Is It Really the Golden World of Crypto?
I would certainly not go as far as saying that we are on the brink of the golden world of crypto. Far from it. We are just in toddler stages. However, in no time at all, what happened with the internet will happen with digital currencies and with blockchain technology for record keeping.
The question is, would we rather sit back and watch it unfold and leave us behind? Just as advanced telecommunication left behind most people who are now in their seventies (who understandably resisted technology) and who struggle to even send an email. Or do we learn about it?
The biggest dangers and risks with cryptocurrencies do remain. Using the currency to finance illegal transactions will always be a potential problem because of anonymity. This does not mean that the same illegal transactions cannot be financed with FIAT currencies.
It simply means that Central Banks and Governments need to step up regularisation. Cryptocurrencies are not going to go away. They will stay in spite of resistance. The question is, should we be looking at a way to control them rather than ban them?
Should we be looking at digital currencies as a new world order with more freedom? Are we on the threshold of the Golden World of Crypto?
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Author: Mariella S.
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