Cryptocurrencies have undoubtedly proven their credentials as a pioneering and disruptive innovation. In 2017, the world sat up and took notice as Bitcoin ballooned from below US$1,000 to almost US$20,000 – with plenty of rises and falls along the way – in a crazy 12 months that captured headlines worldwide.
Whether you were gripped by this exciting ‘new’ asset and are just working out how to trade by brushing up on an options trading tutorial, or are concerned about what this means for the future of the established system of currencies and payments, what happens next matters.
The challenges faced by cryptocurrency
Perhaps inevitably, the rise of cryptocurrencies such as Bitcoin has led to challenges. Firstly, there are a lot of people with vested interests in the existing system that have been left red-faced by the rise of an asset that is free from regulation by central banks.
On top of that, the strengths of cryptocurrencies have been exploited by people engaged in criminal activity. People engaged in the sale of illegal goods have been attracted by the privacy and anonymity offered, while scammers have jumped on the opportunity to create or worsen volatility to make quick money.
A combination of all of these factors has led to regulators in places such as South Korea to introduce regulation on the way cryptocurrencies are bought and used.
If nations and regions impose rules and regulations on the likes of Bitcoin, will this spell trouble for the long-term future of cryptocurrencies? Not necessarily. The blockchain technology involved in digital payment formats is widely seen as having great potential to help speed up the transfer of money and help payments to be safe and secure.
One way of harnessing the essence of cryptocurrencies – while still maintaining a sense of control – is for states, cities or regions to establish their own. New rivals to Bitcoin are springing up all the time but recently these have taken on a geographic feel.
Over in South Korea, for example, Seoul City has announced plans to unveil S-Coin, a cryptocurrency that could be used in welfare programmes around the city.
Back at the end of last year, Dubai’s government launched the blockchain-based emCash currency. Using its emWallet payment system people can use this to buy everything from ‘their daily coffee and children’s school fee to utility charges and money transfers’ using near-field communication.
Dubai Economy deputy director general Ali Ibrahim said: “A digital currency has varied advantages – faster processing, improved delivery time, less complexity and cost, to name a few. It will change the way people live and do business in Dubai, and mark a giant leap for the city in harnessing game-changing innovations to improve ease of business and quality of life.”
Cryptocurrencies are ‘an experiment’
As with anything to do with cryptocurrencies, however, it remains to be seen how or why this will develop.
Singapore’s central bank has vowed to keep a close eye on developments elsewhere – weighing up the risks and success of the regulation drawn up in reaction to them.
In a written answer to a question from politicians on banning the trading of cryptocurrency, Deputy Prime Minister Tharman Shanmugaratnam said: “Cryptocurrencies are an experiment. The number and different forms of cryptocurrencies is growing internationally. It is too early to say if they will succeed. If some do succeed, their full implications will also not be known for some time.”
He added: “The Monetary Authority of Singapore (MAS) has been closely studying these developments and the potential risks they pose. As of now, there is no strong case to ban cryptocurrency trading here.”
Don’t ignore the power of Bitcoin
It remains to be seen whether or not location-specific cryptocurrencies can take off. While they might have the support of central banks and governments, the cryptocurrency movement so far has been defined by the hopes and wishes of the users. If they show an appetite to use Bitcoin or similar rivals then it will be difficult to knock this off its perch.
Bitcoin has established itself as the market leader and might well weather the storm of scams and regulations. In fact, these might just serve to help to legitimize the sector in the eyes of those who are still wary of this type of asset.
Twitter CEO Jack Dorsey believes that Bitcoin will become a dominant currency over the next decade.
Dorsey, who is also chief executive of crypto-friendly mobile payment firm Square, recently said: “The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin… probably over ten years, but it could go faster.”
Whether country, city or region-specific cryptocurrencies take off or not, it’s clear that they are one of the many ways in which people are trying to shape the future of this fast-changing market, especially for politicians and central banks who would like to establish a sense of control over the way this sector heads.
The author Payel Dutta
Happy soul, fond of travelling and loves to read tech columns.