By Sikander Hayat
It is fascinating to understand the creation of money out of thin air by the central banks
and governments across the world. How a fiat currency gains credence
and what is it backed by is a very interesting subject. How piece of
paper or some digits on computer screen can be called money and can
be exchanged for physical goods is fascinating to observe. Off course
value of such a currency is only valid as long as people trust it.
Is there a future
for current paper currencies or these are going to be replaced by
digital ones. With the meteoric rise of Bitcoin and other cryptocurrencies, it is a matter of time before central banks will have to
come up with a mechanism to integrate these into fabric of current
currency universe and find a way to regulate them.
I assume that the
currently cryptocurrencies derive their value from the use by money launderers and criminal element of our societies as it is possibly
the best way to make their black money white. Currencies like
Bitcoin present a clear and present danger to the regulatory regimes
around the world and although nobody is quite sure where these
currencies derive their value from, they have seen a meteoric rise in
the last few months.
Currencies like
Bitcoin must be regulated to make sure that we know who owns how much
of this stuff for variety of reasons. One of these reasons is to make
sure that this does not turn out to be the ponzi scheme which it is
increasingly looking like where as long as someone out there is in
the market to buy it from you, the price will keep rising until the
music stops at which point the currency becomes worthless. If that
happens a lot of people will lose money and lives will be ruined.
Other important
reason is it is very hard to stop accumulation of criminal funds when
regulatory authorities have no idea of who owns the units in these
crytocurrencies. This situation is similar to bearer shares which
have now been banned in large parts of world exactly because of the
reason that we do not know who owns them and what value is held by
individuals. Bearer shares have proved to be a good way of hiding money which has been acquired by either by criminal enterprise or by
swindling funds from national budgets in countries where
accountability is not very strong.
Panama papers and
more recently treasure island papers have been good examples of such
phenomena.
May be it is a
futile exercise to try to control market forces as from siliconvalley to to the back alleys of Mumbai, people are mining
cryptocurrencies. The forces which brought internet age are the same
forces which are going to transform the currency universe and the way
we make payments . Regulatory authorities and central banks will have
to live with the consequences of this new world where value / money
can be anything as long as there is a mechanism to exchange one value
for an other. These digital currencies do just that. The jury is out
on the scale of disruption caused by cryptocurrencies but the impact
can already be seen.
Related Posts:
look Dollar and Euro are really used by criminals they didn't use other currency before, laundering money, terrorists, drugs, and every corrupt politician use Cash in Dollars or Euro, the central banks create every time financial burbles, they take your money, my money and only give poornes, but they pay wars where they want...i hope really with all my heart that bitcoin kill and change all system...💪 :) , this articles in the newspapers are payed by the people who is afraid that bitcoin will change everything...
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