In recent times, there has been an increase in the search by investors for alternative avenues to keep their money, and in an effort to be ‘early adopters’ of Virtual money also known as Cryptocurrency, many barely acquainted with the dynamics of blockchain technology have delved into it with their entire savings, many ending in huge losses. However, Experts say most Central Banks across the globe are already under pressure to issue sovereign digital currency as the world is gradually embracing virtual or digital money despite its volatility.
An Economist and Chief Executive Officer, Global Analytics Tope Fasua who disclosed this on Tuesday at the February edition of the Finance Correspondents Association of Nigeria (FICAN) monthly forum in Lagos, saying although no banker to the government is likely to support Cryptocurrency, however, they may have to consider the option of issuing their own Central Bank Digital Currency (CBDCs).
According to him, about five (5) countries namely China, Ecuador, Senegal, Tunisia and Singapore have issued digital currencies, not Cryptocurency, and bankers know that they are done if cryptocurrencies really take off and replaces traditional currencies.
Specifically, he said quite a number of bankers have invested in cryptos just to hedge their bet. But the traditional financial system is deeply rooted, organized and backed by government, unlike the Cryptocurrency mining space.
This is coming at a time when Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), has honoured the invitation of the Senate over the ban placed on cryptocurrency-related accounts in the country.
Emefiele arrived at the National Assembly (NASS) on Tuesday to honour the request by the Senate Joint Committee on Banking Insurance and other financial institutions.
Cryptocurrency is defined by Investopedia as a decentralized “digital or virtual currency that uses cryptography for security” making it difficult to counterfeit. It is a medium of exchange like normal currencies such as USD, but designed for the purpose of exchanging digital information. Basically, the psychology behind crytocurrency is to disrupt the existing financial systems of the world.
Of all the various existing types of Crytocurrencies that are in existence. Bitcoin is the most common form of Cryto-currency used as it is said to be have a larger lead as a store of value over others in having existed 8 years without failure. The price of Bitcoin did not change for a certain number of years then it became $20,000 per Bitcoin in 2017 and $7,000 in April 2020 based on data given by Investopedia.
The Volatility of Crytocurrency
There is no doubt that virtual or digital money has its many advantages, however, the disadvantages are huge and if not checked can be disruptive not just to government owned financial institutions, but as well to individuals in that space.
Earlier in the week, Elon Musk was reported to have lost $15 billion dollars in one day after Tesla Inc. shares slid 8.6% on Monday, wiping $15.2 billion from his net worth.
It was Tesla’s biggest decline since September, fueled in part by Musk’s comments over the weekend that the prices of Bitcoin and smaller rival Ether “do seem high.” His message — via his favored medium of Twitter — came two weeks after Tesla announced it added $1.5 billion in Bitcoin to its balance sheet.
The cryptocurrency, which had surged more than 400% over the past year, tumbled for a second day on Tuesday, at one point slipping below $50,000 on skepticism over the durability of its rally. Tesla shares also continued their slide in early trading in New York, falling 5.2% to $677.50 at 8:09 a.m.
Speaking on the topic: “Ban on Cryptocurrency-related accounts in Nigeria and concerns of global central banking,” Fasua stated that the proponents of the cryptocurrency believe that there is a need to push back and do something different, that will mimic the attributes of a gold-backed currency in view of durability and scarcity, but better than the current system by being smart, secure and not possible for central banks to issue at will.
His words: “If it started as a rebellion (which is the case), then you must think of the incentive for the global economy to sign on to that rebellion with you against the devil they know. This then means that until there is global acceptance of the currencies, it will continue to be easy to create panic in the crypto world and big players can dump the currency when they have achieved gains.
“It then becomes worse than the stock market because, for cryptocurrencies, the fundamentals are non-existent apart from an analysis of how many are adopting the currency and who is winning between an established traditional banking system and the new kids on the block.”
According to him, the bigger picture for Cryptocurrency is that it sets the stage for global single currency. However, a major challenge with is that it comes with a lot of risk. Once an individual lincurs losses there is no opportunity for recourse. In the event of the death of a coiner, no one is able to access their investments which are encrypted in cryptography.
“People don’t usually plan to die. Now, this is where regulation helps in the financial markets. Apart from deposit insurance, which kicks in, in the event of the collapse of an insured and regulated financial institution, the relations of a dead account holder in a traditional bank could still have access to their balances,” Fasua stated.
Who is Satoshi Nakmoto
The digital trading platform lists Satoshi Nakamoto the pseudonym used by the individual or group of people who developed bitcoin as one of the recipients of the public filing. The name “Nakamoto” first came into the spotlight in 2009 when bitcoin was invented. Over the years, many have claimed, or have been claimed, to be Nakamoto.
Although the mechanics of blockchain are extremely complex, the basic idea is simple: to decentralize the storage of data so that such data cannot be owned, controlled or manipulated by a central actor.
The recent surge in and subsequent collapse of the value of Bitcoin has brought renewed attention to the blockchain architecture that underpins cryptocurrencies. However, blockchain’s uses go far beyond virtual money. The technology could change the way that ownership, privacy, uncertainty and collaboration are conceived of in the digital world, disrupting sectors and practices as diverse as financial markets, content distribution, supply chain management, the dispersal of humanitarian aid and even voting in a general election.
Dr Garrick Hileman explains the basic concept of a blockchain, outlining some of the technology’s current uses as well as suggesting a number of these potential future applications that could revolutionize the global economy.
#Bitcoin and other Crypto-Currencies are considered outlaws in some of the countries as the Government and the financial institutions are not able to control or regulate it. So, it scares them. # Crypto-Currency Market attracts Criminals and people interested in tax evasion and money laundering.
