The riddled economy of Venezuela, crushed after years of mismanagement and a Bolivar worth less than the paper it is printed on is an example of why cryptocurrency (cyrpto) is here to stay long term.
In a country like Venezuela, Bitcoin is a lifeline to buy everyday needs like food, plane tickets, or even paying employees. It cannot be directly controlled through excessive currency production and central bank rate controls.
The Harare, High Court lifted a ban by the central bank that barred all banks and financial institutions from offering services to cryptocurrency exchanges on the 24th of May 2018.
Despite the Reserve Bank of Zimbabwe (RBZ) banning cryptocurrency, investors around the world are beginning to trust bitcoin like gold, unlike fiat currencies that hold no actual value and can be manipulated or printed into oblivion.
Brisbane International Airport is the first international airport that is now taking crypto payments. Over 20 million passengers pass through the airport every year. Even Global payments processor Mastercard is interested in cryptocurrency.
Mastercard’s chief financial officer, Martina Hund-Mejean sees promise in Blockchain and told Arabian Business; “Ripple has used the blockchain to create a messaging format to aid clearing, similar to what SWIFT does and might be very good in that instance in terms of messaging.”
We are in the beginning stages of a transformation in how the world uses money. As more and more countries see their fiat currencies fail under the pressure of quantitative easing and manipulation, more investors will turn to the reliability and trust of decentralized cryptocurrencies.
It might not take as long as some imagine either. The Marshall Islands made its own cryptocurrency, doing away with the US dollar on the 1st of March 2018.
This was after the digital coin received approval from the country’s parliament to become the nation’s official legal tender.
Back in February, Venezuela launched its own oil-backed cryptocurrency called the Petro, but it hasn’t completely removed the Bolivar from circulation. Each coin is backed by one barrel of crude oil.
Venezuela is suffering a dire shortage of bank notes after the central bank failed to issue enough cash to keep pace with surging inflation.
ATM’s are empty across the capital and local banks limit customers to withdraw the equivalent of just a few cents a day.
The International Monetary Fund predicts inflation will spiral to 13 000 percent by the end of this year, while the economy is set to contract 15 percent.
The President of Venezuela, Nicolás Maduro said: “The Petro will have a great impact, in how we access foreign currencies for the country and in how we obtain goods and services that we need from around the world,” whilst speaking on state TV just before the launch of the cryptocurrency.
The Chinese President Xi Jinping has also openly acknowledged that Blockchain is a “Breakthrough” Technology whilst speaking at the Chinese Academy of Science annual academic conference on the 28th of May 2018.
He said: “A new generation of technology represented by artificial intelligence, quantum information, mobile communications, internet of things and blockchain is accelerating breakthrough applications.”
According to him, these technologies will keep the momentum of the fourth industrial revolution going and this “new generation of the industrial revolution” is reshaping the economic structure.
Rather than just ban the trading of cryptocurrency, the RBZ should hold forums and workshops to understand how it can contribute to the development of the economy.
People with knowledge on Blockchain will make presentations and discussions should be held on the topic.
Only then will the country have a better understanding on cryptocurrencies and take an official position. Recently there was a scam involving a company called BTC Global, which defrauded investors of $80 million with promises of huge returns.
There have also been numerous fake Initial Coin Offerings (ICO’s). In this regard it is commendable that the RBZ is protecting people from losing money to Ponzi schemes.
However, banning Cryptocurrencies in the country will hinder the development of Blockchain Technology in the future. Even with ordinary money, Ponzi schemes take place and fraudsters will always be there.
The RBZ should rather create a policy, which they can ban Cryptocurrenncy ICO’s and regulate Crypto Exchanges. Recently SBI Holdings launched Japan’s first bank-backed Crypto Exchange.
Since the People’s Bank of China (PBOC) imposed a ban on local and foreign cryptocurrency exchanges and ICO websites earlier this year, there is a strong indication that the Chinese government may be willing to relax its ban on cryptos and engage the market with its own regulations.
A speech by the Chinese central bank governor Zhou Xiaochuan in March 2018 seemed to indicate the government sees digital assets as an unavoidable step in the evolution of money. He stated that the replacement of paper money and coins by digital assets was inevitable, and he further revealed that the PBOC was studying Bitcoin and other cryptocurrencies in order to help in issuing its own digital currency.
Recently an article was published in the Chinese People’s Daily newspaper. The article has the idea that in China’s increasingly innovation-driven economy, a blanket ban on a technology cannot be effective and may have the unintended consequence of handing over the technological leadership initiative to another country.
It goes on to state that fencing off bitcoin exchanges can’t effectively end bitcoin trade, and fears of a bitcoin bubble could leave China behind in the digital currency revolution.