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What future for cryptocurrencies?

Categories : Cash generates security, Cash is trust
August 9, 2017
Tags : Cryptocurrency, Digital, Digital money, Virtual currencies
The pool of cryptocurrencies is growing, including a recently launched sharia-compliant one, but do these payment tools truly respond to the requirements of being a currency?
Communication Team / Equipo de Comunicación

Virtual currencies have gained in popularity since their introduction into the financial system a few years ago. Bitcoin – created by Satoshi Nakamoto in 2009 – was one of the most successful ones for a long time. But disagreements within the bitcoin community – that led to its recent schism and subsequent  launch of bitcoin cash – and the appearance of other decentralised e-currencies are further fragmenting the digital payments landscape. For instance, the first “sharia-compliant currency” was recently created in Dubai, pegged to the price of gold.

Investors are especially attracted by the high speculative potential of such virtual currencies and their ability to be exchanged for cash (in many cases) – but their value remains extremely variable. For instance, Ethereum lost 25% of its value in just a few days in late June.  

Specialists are worried about the lack of transparency around their issuance, which is not regulated by any institution. In addition, many are suspicious of their true value and doubt the decentralised nature of the asset. In fact, there is a growth in popularity of initial coin offerings (ICO) – a modern form of IPO released by fintech companies to crowdfund new cryptocurrencies – which has been pushing the price of virtual currencies upward. At present, around 20 ICOs are launched every month but, because there is no regulation or scrutiny, investors are often not properly informed and are have often become victims of scams.

Cryptocurrencies are a natural result of the world’s digitalisation, but their future depends on several factors including their stability, security, transparency and user confidence. In addition, hacking attacks represent their most significant threat, which might ultimately lead to their full abandonment by wary consumers. And as governments ponder over the topic, a central bank adviser in China recently stated, “Bitcoin [and other virtual currencies] can be an asset, but will never be a currency” (