Will digital currencies become commonplace in financial and banking transactions in the future? It’s a question often raised by people and some governments as well at a time when some global jurisdictions and platforms are promoting these currencies in the face of concerns by regulators that cryptocurrency trades can potential involve money laundering.
The world’s central banks have shunned cryptocurrencies, but modern financial technology has contributed to its rapid rise. For the global banking system, cryptocurrencies create more risks for them, notably the challenges of dealing with conventional and digital currencies alike.
Britain’s FT newspaper expects that some central banks will inevitably begin issuing digital currencies in their local jurisdictions, despite the difficulties that may arise from trading in these currencies, making payment transfers, or placing deposits or obtaining loans from the banking sector for transfer to networks that are not regulated by them. This could undermine the regulatory role of central banks in maintaining control of transactions.
Amid this upheaval in the cryptocurrency world, the Indian government recently announced that it is in the process of amending its income tax laws to include gains from cryptocurrency trading.
Prices of digital currencies have soared in recent years, up from its initial price per unit roughly equivalent to the cost of a small pizza. Today, the same unit can buy the holder a full restaurant in the pizza industry. The price of the digital currency “Bitcoin” soared above $69,000 last month, after posting some losses previously.
Former US presidential candidate Hillary Clinton recently warned in an economic forum in Singapore against dealing with cryptocurrencies, stressing they have the potential to eventually weaken entire countries and undermine traditional currencies, including the US dollar. Indeed, there are dark forces working to destabilise some countries and central banks around the world, starting from small states to large ones.
China, for its part, announced through the Chinese Central Bank, that dealing with encrypted digital currencies is considered “illegal”, and pledged to take strict measures, including bans against the activities of dealers, while its central bank will ban financial institutions, payments, internet and trade companies that facilitate the illegal trading of cryptocurrencies.
Such steps will inevitably lead to a decline in the demand for cryptocurrencies, especially if tax evaders using these digital currencies find them monitored. At the same time, the international financial system is working to develop policies to keep pace with these digital developments too.
