Financial technology or fintech is rapidly growing, to a certain extent to which it is unpredictable to guess how far it will evolve. Bitcoin, founded by mysterious individual or group, known as Satoshi Nakamoto, became the first decentralized cryptocurrency ever created in 2009. At that time, knowledge of virtual currencies was only floating around in the cryptocurrencies-and-tech-savvy consumers.
As the cryptocurrencies grow and mature, countries around the world began to seek and engage in the industry. These include countries that dominate the world economy such as China and the United States, not forgetting Venezuela.
Not only has fintech innovation been accepted in certain countries, but it has also made some countries eager to establish their national cryptocurrencies as China is currently studying, whilst, Bhutan has released its virtual currencies, Prizm.
Compared to global fintech developments, Malaysia is lagging behind but fret not, the country is embracing the technology. This is evidenced by the presentation by Finance Minister Lim Guan Eng in the 2020 Budget where he announced an allocation of RM25 million for the country’s digital development including blockchain technology. This indicates that Malaysia is gradually welcoming the crypto industry.
Despite the crypto industry is well received in the country, is there any room for cryptocurrencies to be treated as national currency? The question arises when the nature of cryptocurrencies is decentralized and virtual, contradicting the conventional currencies.
In a research by an economist and mathematician, William Stanley Jevons in 1875, he outlined four main functions of universally accepted currencies, which are; medium, measure, standard and store. As far as we are concerned, the role of conventional currencies are mainly for the medium of financial exchange, legal tender for debt, standard value, accounting measurement as well as for the purpose of purchasing power.
Some experts and industry players think cryptocurrency will be the future of currency. However, based on all of the definitions mentioned above, cryptocurrency fails to meet all of its roles and functions.
Therefore, in Malaysia, there are slight chances for Bitcoin or other cryptocurrencies to be acknowledged as national currency. Based on research conducted by the Islamic Financial experts Sheila Ainon Yussof and Abdullah Al-Harthy, they argued that although the cryptocurrency was transparent and did not involve third parties, its existence put pressure on the country’s financial regulations.
In the meantime, currencies are being used to support the country’s technological advances. Further discussion on the role of alternative currencies, i.e. cryptocurrencies, will they compete with existing currencies, or complement each other?
Should cryptocurrencies be accepted or regulated as national currency, will the government intervene in favour of its user as they lose autonomy over the cryptocurrency? Or will they just accept, as they can take advantage of both fiat and cryptocurrencies?
The crypto community has the right to invest, transfer and trade without intermediaries, be it the government or any institutions. In your opinion, would they ignore those advantages, and accept government intervention, if cryptocurrency is adopted as national currency?
In early January this year, the government announced that cryptocurrencies would be regulated by the Securities Commission including Bank Negara Malaysia (BNM). However, the regulator is not about monitoring cryptocurrency trading or investments, but rather a measure to curb cybercrime. At the same time, for cryptocurrencies to be accepted as an alternative national currency, it must also have a large consumer market.
Guan Eng has mentioned that the mass adoption of cryptocurrencies and related technologies is still low in the country. However, according to the 2020 Economic Review report, industry players and major sectors of the country are utilizing and taking steps towards digital currencies.
Cryptocurrency such as Bitcoin is seen unable to play the role of national currency or an alternative to existing currencies unless the authorities change their perception of the cryptocurrencies.
Consequently, the readiness to make cryptocurrency as a national currency depends on the willingness of both parties, consumers and government – to produce a complete format or regulation to make it live. The developing world certainly does not want to miss out on all aspects including financial technology. It is time for the government to play a role in addressing this issue.