Cryptocurrencies seem to be establishing themselves as a serious alternative to traditional currencies. Why? Because huge companies like Facebook, with their own currency, the Libra coin, are starting to offer a serious alternative to previous payment methods. No matter whether it is dollars, euros or the British pound.
This situation and the increasing spread of partially established cryptocurrencies, such as Bitcoin, are calling entire countries on the plan to do likewise in this area. Different countries think about it, or are already in the process of completing their own country coins, which should be linked to the respective currency.
In this blog article, we look at the developments that are pending here in the near future. At the same time, we examine the question of whether it makes sense at all that different countries should work cooperatively to create a cryptocurrency.
Cryptocurrencies shortly before the breakthrough
It took a full ten years for Bitcoin, the mother of all cryptocurrencies, to be traded on the New York and Stuttgart stock exchanges under state control. The efforts of the respective authorities show that cryptocurrencies are increasingly losing their image of the niche phenomenon and are seen as a serious investment object. Of course, this does not apply to all coins, but almost every day there are more serious opponents on the market.
However, this also heralds a new era in monetary policy. The blockchain strategy of the Federal Republic of Germany, which has already been approved by the Federal Cabinet, shows how important cryptocurrencies are already. It recently decided that the development of its own federal coin would be given top priority.
The background to this strategy is certainly the burgeoning competition from Facebook and Co. With a federal coin linked to the euro, Germany would have the opportunity to offer a serious alternative in the crypto segment. This would primarily come into play in online trading. China, for example, has been creating a cryptocurrency linked to its own currency for years.
Other nations in Africa also want to participate in the crypto segment, but not primarily because they want to be an alternative to Facebook, but to get a grip on corruption in their own country, which is possible thanks to the transparency of the blockchain.
The blockchain is universal – what about supranational cooperation?
Since cryptocurrencies are an issue in many countries, one might come up with the idea of pooling forces and working together on an international project that aims to create a common cryptocurrency. But would such cooperation make any sense at all?
I remain skeptical here. There are simply too many open questions that have to be answered before such cooperation can even be considered.
At the beginning, the states would have to be clear about what the new currency should be like. What purpose should it primarily serve? The needs of different regions of the world come into play here.
Blockchain technology must not repeat the mistakes of the established currencies
The situation is very similar to that of the euro, where it is repeatedly pointed out that it is too “hard” for Greece or Italy. These countries simply have different requirements in terms of economic orientation than Germany or Austria and would therefore also need a differently oriented currency. A blockchain-based currency faces the same challenges.
In the case of Africa and Europe, there are even bigger differences than is already the case within Europe. Europe needs a completely different monetary system than other regions of the world. It is fairly likely that no agreement can be reached in the targeting debate.
Financial experts are certain: discussion is more than overripe
The increasing penetration of our lives by cryptocurrencies makes it necessary to enter into a sound economic and monetary policy discussion. The creation of a cryptocurrency is a more than complex project in which both politicians, economists or financial experts and technicians have to pull together. To do this, there must be a basic consensus on what the future of monetary policy should look like. What are the needs of individual states and the people who live in them? This is a process that will not end overnight. It is therefore all the more important to start this discussion very quickly, because blockchain technology is a fantastic opportunity to revolutionize the economic world.
Blockchain regulation a must
The state regulation of the crypto markets is essential if they want to be taken seriously as a payment method or a store of value. Fortunately, this was exactly what was brought to life at the Intercontinental Exchange in New York in late September 2019. Bitcoin trading is now possible for the first time under state supervision. This creates security and trust in this very young currency, which appeared out of nowhere a year ago.
These government regulations will not harm cryptocurrencies, on the contrary, they will even benefit from them. Digital currencies suddenly lose the smack of the criminal and are becoming increasingly accessible to the broad mass of investors – just think of the financial strength of institutional investors.
Cryptocurrencies are paving their way
In truth, no other approach is possible, on the part of the states. Because if one were to ban cryptocurrencies, this would certainly encourage many people to continue trading in this segment unregulated. Everything that is banned has a certain appeal for people. This is why government action is much wiser. State legalization – cryptocurrencies were never banned – allows states to launch their own coins as a serious alternative to Bitcoin, Libra and Co. A very smart move.
The “Libra-Coin” cryptocurrency
In the past few months, the project of Mark Zuckerberg’s own coin has been blowing extremely rough. Various investors and cooperation partners left the digital boat. Still, Facebook wants to help Libra give birth.
Whatever the currency, the potential is huge when you consider the two billion Facebook users. These are dimensions that would amount to an economic superpower. Under no circumstances should this project and its effects be underestimated.
This is exactly why an in-depth discussion is more than overdue. Hopefully further regulations will follow, so that any damage can be averted from the global economy.
As a financial expert, I primarily see the opportunities of cryptocurrencies. These seem to have outgrown their infancy and set about revolutionizing our everyday money life.
Neither politics nor the economy have yet found definitive answers on how they can be meaningfully integrated into our lives. One thing is clear to me as a financial expert: State regulation is the productive ground on which these currencies grow and can provide added value for everyone involved. The trust that this creates can subsequently be used by governments in creating their own cryptocurrencies and thus ushering in a new era of monetary policy. Then we are spoiled for choice as to which forms of payment we would like to use more and which not.