By Nelly Favis-Villafuerte
Many people here and abroad are talking about cryptocurrency (since 2009 when bitcoin, the first cryptocurrency was founded) – some in excitement, others in confusion and still many others in apprehension. But one thing is certain, majority of us (inlcuding exporters, importers, investors, speculators, housewives and even bankers, accountants, government officials, financial strategists and analysts) have a very limited knowledge about cryptocurrencies – a global phenomenon that continues to shake and alter global finance and economy.
One may ask: Is there a need for the ordinary layman like you and me to understand at least the basic concepts and essentials of cryptocurrencies? Does cryptocurrency have the power to radically disrupt the supply of physical money? Does cryptocurrency affect the market for credit cards? Does cryptocurrency have a vital impact on our lives? Does cryptocurrency have the power to transform the markets, our culture, and our civilization? The answer is yes on all counts.
The usage of cryptocurrency has exploded some time ago. Not just now. Cryptocurrency is digital currency or virtual currency considered as alternative currencies designed as a medium of exchange using cryptology to secure transactions. To differentiate cryptocurrency with credit cards or physical money deposited in banks – cryptocurrency is decentralized and therefore central banks cannot control the supply of currency by printing units of fiat money. Since cryptocurrency is a kind of digital cash system without a central entity (decentralized that is) its supply and value are controlled by the acts of their users as well as the protocols based on advanced mathematics and computer engineering principles that render them virtually impossible to break. These highly complex protocols also hide the identities of cryptocurrency users. And by the way, the transformation of money from the physical to the digital world is already unstoppable not only in US (but in other countries as well including the Philippines). Stated otherwise, different economies in the world have already been shifting away from cash towards the so-called digital/electronic money supply including cryptocurrency which is a kind of digital currency.
Let me share with you some interesting information about cryptocurrency (References: Publications and Internet reports) – in bullet form for easy reading:
- Many are asking nowadays – what’s the latest in cryptocurrency? Do you know that as of November 6, 2017, there are over 1,172 (and still growing) kinds of cryptocurrencies available over the Internet. The latest cryptocurrency soon to overwhelm the world is the New Digital Dinars originating in the Moslem countries. An Internet report reveals that on January 24, 2018, the global network for processing Digital Dinar transactions goes online – although, the initial coin offering of digital dinars was held last May on the first day of Ramadan. The difference between the Digital Dinars and the other major crypto-money in the market today is the fact that Digital Dinars are 100% backed by real, in-the-bank gold bullion. (More on Digital Dinars in Part II);
- Do you know that as of June 2017, the total market capitalization of cryptocurrencies is bigger than 100 billion US dollars;
- Do you know that cryptocurrencies are not centralized since this medium of exchange does not have a central entity (like central bank) to control its operations;
- Do you know that the number of cryptocurrencies available over the Internet as of November 2017 was over 1,172. This figure is still growing since a new cryptocurrency can be created at any time. Yes, every day new cryptocurrencies emerge, some fade away, some investors and speculators lose money while others get rich;
- Do you know that the top ten (10) cryptocurrencies as of January 13, 2017 are: Bitcoin, Ethereum, Ripple, Litecoin, Monero, Ethereum Classic, Dash, Augur, Maid Safe Coin, and NEM;
- Do you know that while cryptocurrency users enjoy benefits not available to traditional currency users – there are many risks and disadvantages, too (To be discussed in the subsequent parts of this series);
- Do you know that today, the legal status of cryptocurrencies are different from one country to another. Take the case of bitcoin, the most popular cryptocurrency with the highest market capitalization. In some countries, the legal status of cryptocurrencies is still undefined; while in other countries it is changing. Other countries have banned or restricted the use of cryptocurrencies while other countries have allowed the use and trade of cryptocurrencies. There are countries that allow the operations of cryptocurrency exchanges but they have to be duly registered with the government. A measure required to insure control by the government. In the Philippines, our Bangko Sentral ng Pilipinas (BSP) issued Circular No. 944 dated February 6, 2017. The subject of the BSP Circular 944 is Guidelines for Virtual Currency (VC) Exchanges. More on BSP Circular 944 in the succeeding articles on cryptocurrency. (To be continued)
Have a joyful day! (For comments/reactions please send to Ms. Villafuerte’s email: email@example.com).