The ‘Uber-ising’ of universal currency
BYPASSES CENTRAL REGULATORY AUTHORITY Cryptocurrency last week soared to record high of more than $8 000.
Bitcoin, which last week soared to a new record high of more than $8 000 (about R113 150), is the monetary equivalent of Uber, since it bypasses central bank regulation and could be attractive for financially fragile countries, economists say.
Nevertheless, it is precisely the lack of oversight that opens up the users of cryptocurrencies such as bitcoin to risks and dangers, analysts warn.
“Bitcoin? It’s about ‘Uber-ising’ currency, about not having a central bank that decides the price,” said Ludovic Subran, chief economist at credit insurer Euler Hermes, referring to Uber, the ride-hailing app that has set the cat among the pigeons in the taxi sector in recent years.
“Yes, it’s exactly that: it bypasses a central regulatory authority. That’s the genius of this invention,” agreed Yves Choueifaty, founder of the Paris-based asset management firm Tobam, which this week launched the first European fund investing in bitcoin.
Bitcoin is not regulated, but is traded on specialist platforms. It has no legal exchange rate and no central bank backing it. Launched in 2009 as a bit of encrypted software written by someone using the Japanese-sounding name Satoshi Nakamoto, bitcoin is controlled and regulated by its community of users.
Investors are already referring to it as “digital gold” as bitcoin soared to a record high of more than $8 000 last week, a staggering rise in value from just under $1 000 at the beginning of the year.
“We have no need for central banks,” said Yves Choueifaty, suggesting that institutional investors may be behind the recent sharp gains, even if he insisted that there was “no bitcoin bubble”.
The growing interest in bitcoin is catching mainstream attention: the CME Group of Chicago, one of the world’s biggest exchanges, has decided to launch a bitcoin futures marketplace. And prestigious US universities are offering courses in blockchain technology, on which cryptocurrencies are based.
Virtual currencies could also prove attractive to economic players in countries such as Zimbabwe or Venezuela, whose fiat currencies have been ravaged hyperinflation. Caracas, for example, has had to issue a new 100 000 bolivar bill, when just a year ago, the biggest-denomination banknote was 100 bolivars.
“Think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country – such as the US dollar – some of these economies might see a growing use of virtual currencies. Call it dollarisation 2.0,” said the head of the International Monetary Fund, Christine Lagarde, recently. – AFP