- March 6, 2019
Cryptocurrencies by definition create challenges for the financial sector. They have the potential to change the way economies grow but like the same Internet which is used to transfer them, there is no regulatory framework. In the United States, politicians sponsored two bills on virtual currency regulation which will promote innovation while protecting the public. This country, like many others, is “on the fence” regarding what to do with cryptocurrencies and how to define the virtual currency which is not managed by any one financial institution.
In the U.S Library of Congress, research entitled “Regulation of Cryptocurrency Around the World” gave reports on 130 countries and “regional organizations that have issued laws or policies on the subject”. It found that many countries see the potential yet they have been reluctant to create legislation or financial groups which can monitor it.
Challenges of Cryptocurrencies
Although called by many names globally, the consequences are the same; central banks are warning citizens of the high risk associated with their cryptocurrency investments. Some of the issues with this virtual currency are that it is not guaranteed by the State, the organizations which issue this currency are unregulated and operate in a volatile market. As it is today, there is no legal recourse for persons who invest in this virtual currency. In a world where many crimes are committed on the web, there is a significant risk that transactions in cryptocurrencies will be used for illegal activities. With a loss of billions of dollars, if governments take on this high-risk currency, there will be a need to create anti-money laundering and cyber protection laws.
In the Caribbean (specifically the Bahamas and Barbados), despite the risk associated with virtual currencies, its presence has not been ignored. Presently, the Bahamas does not have legislation on cryptocurrencies but the Central Bank there has indicated that its 2017 regulations which provide a framework for a system of national electronic payments services is also applicable to cryptocurrencies. The island state is also making plans to lay a bill which will place this currency under crime legislation.
On March 1, 2019, the Central Bank of the Bahamas announced its Project Sand Dollar which is the official name for its payments system modernisation initiative. The Central Bank press release stated that ”all residents in The Bahamas will have equal, expanded access to modernised digital payments capabilities” and there should be “concurrent reduction in cash transactions”. In the local Bahamian media, Central Bank of The Bahamas Governor John Rolle indicated that the digital Bahamian dollar will be rolled out in the test communities by 2020.
Barbados, like the Bahamas and many other countries, does not have specific legislation on cryptocurrencies. However it is home to Bitt Inc., “the financial technology startup that has signed a Memorandum of Understanding with the ECCB to launch a pilot of blockchain technology, which will enable eight Caribbean countries to test the use of cryptocurrencies alongside their national currencies”.
Cryptocurrencies in Financial Market Finding An Identity
On the financial market, cryptocurrency is hard to define. Is it a security or a currency? Bitcoin, a cryptocurrency, is not a security as buying it does not make a person a shareholder. Most people would say it is a currency as it is suitable for facilitating foreign exchange. It could also provide opportunities for developing countries but that may not have the financial security or stability to make international investments.
Benefits of Cryptocurrencies
Users of this currency stand by its benefits, highlighting the ease of business, lower transaction fees, decentralization, security and fraud protection when using a blockchain technology. Today, it has grown in popularity in regions of Africa as businesses see the potential of its use.
Sources
https://www.loc.gov/law/help/cryptocurrency/world-survey.php
https://www.huffingtonpost.com/ameer-rosic-/7-incredible-benefits-of-_1_b_13160110.html
http://www.tribune242.com/news/2019/mar/04/digital-b-pilot-ready-2020/