Bitcoin, Cryptocurrencies and The Money in the New Era - 3 -
4. Trust, Belief and Regulation
As almost for all commodities or
financial instruments, trust, belief and legal regulation have a very important
effect in also the currency. If a currency has not legal infrastructure, public
trust and belief, probably it will not live and be acceptable in the long term.
The reason why most of the people
trust and believe the fiat money system is clear. We know that fiat monies are
issued by the central banks and mostly they are backed by the states. Actually,
issuing by a central bank and backed by a state make fiat monies “the real currency”
for the humankind. Unfortunately, it is clear that cryptocurrencies don't have
the public trust and belief enough yet. Due to fact that they are not backed by
a state and not issued by a central bank people generally consider
cryptocurrencies as an unreliable, even a speculative investment tool.
On the other hand, Bitcoin is very
young now but it has possibility to become very popular sooner, then it will be
able to be a rival for traditional fiat money system or other currencies which
means that it could be better to create necessary legislation for
cryptocurrencies now. Because later could be too late for this action to take.
Even though Bitcoin is not yet widespread and isn’t as wide as other
international currencies, taking consideration Bitcoin continues to increase its
popularity, regulatory measures will be needed.
There are countries in the European
Union that haven’t taken an official stance towards Bitcoins and other virtual
currencies, but as Bitcoins continue to be more popular, it is very clear that we
are going to see more countries begin to create their own policies in order to
regulate virtual currencies. “Further action from other authorities can
reasonably be expected in the near future” (European Central Bank, 2012).
5.Conclusion
As we have discussed before, it is
well-known that Cryptocurrencies have a lot of disadvantages about being widely
accepted for now at least. Generally, in financial subjects, making people
trust you could take a long time. Due to fact that Cryptocurrencies-Bitcoin
have high volatility of value, there is no state or bank guarantee in the back
of it and it has not been widely accepted by the community yet, we could say
easily that cryptocurrency cannot acquire the role of money for now.
On the other hand, it is an
undeniable reality that cryptocurrencies have been attracting a lot of public
attention in recent years. Especially western governments, universities and
Non-governmental Organizations have been making researches about
cryptocurrencies increasing day by day. Moreover, the number of people who
invest on Bitcoin are mounting and everyone asks for information about
Cryptocurrencies in almost every day to financial consulting firms or the
banks. Bitcoins could be regarded as a bad alternative to traditional money
with the scope of criminal activities, because virtual currencies would make
easier to conduct criminal activity such as: money laundering, drugs
trafficking, computer hacking and terrorism.
It is clear that, none of these
activities is widespread or extensive to the use of Bitcoins. There are other bad
or negative sides to using a virtual currency that do not have to do with
criminality such as speculation, risky investment and issue of unpredictability.
It is obvious that without necessary legal regulation and central bank or
government guarantee, Bitcoin or all other Cryptocurrency users bear all the
risks.
It should be accepted that keeping
Bitcoins in a digital Bitcoin wallet will leave your virtual currency
vulnerable. If we consider the issue in the scope of computer hacking for
example. We would say that a digital wallet is weak to computer hackers. In
order to attract people attention to this issue, The European Banking Authority
has issued this warning to its citizens, “Exercise the same caution with your
digital wallet as you would do with your conventional wallet” further urging
users of Bitcoins, “not to store large amounts of Bitcoins in their digital
wallets for an extended period of time”
In conclusion, we could say that if
cryptocurrency will gain the role of money one day in the future, it must serve
also as functions of money also. Even it has some of functions of money like
being a store of value, a unit of account and a medium of exchange,
Cryptocurrencies cannot execute all these functions properly yet.
Despite the fact that the most known
cryptocurrency-Bitcoin has a lot of popularity and a good number of investors,
it is clearly known that it is not highly accepted yet all around the world.
After considering all these facts,
especially in the short term, it seems that cryptocurrency could be an
investment instrument for the investors who like taking risk instead of
acquiring the role of money.
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