Page 31 - Banking Finance April 2020

ARTICLE

The realm of possibilities is huge however the use of a associated with the currency which could lead to the
common currency also poses multiple challenges due to unsuspecting gullible investors incurring huge losses. This
difference in socio economic parameters, inflation and alone explains the reason why many countries have decided
political uncertainty. Also the supervision of such a virtual to ban all cryptocurrencies other than the cryptocurrency
currency could become a bone of contention among floated by the sovereign.
countries. The concept of one currency could be considered
an extension of Euro which is a common currency of Block Chain Technology poses multiple opportunities to
nineteen nations. Even Euro has been facing problems when improve the financial ecosystem and make it more effective
the economy of any one nation is not performing well and however its use for illegal activities has posed many
which in turn exerts downwards pressure on Euro. questions regarding its commercial viability. Many believe
that investment in cryptocurrency is just long term
A common virtual currency could be seen as an extension speculation without any underlying fundamentals and the
of Euro including all the nations. Now if one nation is not fizz will soon fade out also countries like China have since
performing well it would exert pressure on the other nations banned the use of Bitcoins and introduced its owned
to support it to as eventually support the common currency. cryptocurrency to keep track of movement of funds and this
These are some of the challenges that make the adoption trend of state owned cryptocurrencies is expected to gain
of a common virtual currency difficult however the adoption traction as many more countries could ban bitcoins forcing
of virtual currency in general and bitcoin in particular has the cryptocurrency users to invest in state promoted
been rapid in the international grey markets as this currency cryptocurrencies.
is not controlled by any sovereign nation and so is not subject
to their laws also it does not require any trace of the Many countries like Ecuador, China, Senegal, Singapore and
origination of currency issued. Tunisia have launched their own cryptocurrency and major
technology companies have started to explore the idea of
The virtual currency could be used by anyone for purchase launching their own virtual currency based on blockchain
of any goods and at the same time remain anonymous also technology. It may not sound too big a thing but if the virtual
such transaction are outside the purview of tax authorities currency floated by these countries / or fintech companies
of any jurisdiction. It has been increasingly found that gains a foothold then they will be in a position to command
payment for majority of the illegal transactions is now being the financial ecosystem and thereby gain huge socio
made through bitcoins which has posed multiple challenges economic influence.
for the enforcement agencies to choke the supply of money
to illegal activities. Even in India RBI had undertaken a study on the feasibility
of the use of blockchain technology and so far the central
What is pertinent is the fact that a virtual currency which is bank has decided against the use of it. The lost opportunity
common to all nations and is supported and endorsed by the can also be gauged by the fact that we are just exploring
central banks and governments around the world is not the limited use of blockchain technology whereas other
feasible at least for now due to the multiple challenges countries have started the study on launching their own
mentioned above however a virtual currency could become virtual currency.
the defacto payment currency of the world as has been the
case of bitcon, a concept which again is poised with multiple Ofcourse in India the per Capita Income is low and so is
challenges. the risk taking capacity however a complete ban on the
use of blockchain means a lost opportunity. The financial
Since such a crypto currency is not under the purview of any sector is a dynamically evolving sector and the kind of
nation or government agency which is accountable to the transformation that the financial sector has undergone in
public there is no mechanism for addressing any dispute the last few years in unprecedented. In this backdrop it is

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