China Daily Global Edition (USA)
Going a bit beyond bitcoin buzz to cash in on reality
Tucked away amid the hustle and bustle of traffic, people and buildings in Wan Chai, Hong Kong, are small kiosks that hardly merit a second look. After all, in a city that sports automated teller machines and currency exchanges at virtually every nook and corner like mushrooms after a cloudburst, why would these ordinary looking terminals which do not even offer the privacy of cubicles merit any attention? Little wonder, one would find them deserted most of the time.
A closer look, however, tells a different story altogether. These are no ordinary ATMs, but machines that allow you to trade and dabble in cryptocurrencies, Bitcoins and Ethereum, Ether, etc, the new-age currencies that hold young and old alike in thrall. And considering that there are already 21 of these machines, it is only a matter of time before more sprout and multiply.
For many like me from a bygone era, the idea of investing in something that is only notional and does not exist physically is beyond comprehension. But at the same time the promise of unparalleled returns has also been tantalizing. Though fraught with risks, millions of investors, have already jumped onto the bandwagon that promises a pot of gold at the end of the rainbow. The motto seems to be “speculate if you want to accumulate” in a market that already has a valuation in excess of $800 billion and counting.
My quest for a better understanding of the cryptocurrency universe led me to two interesting studies. The first was a white paper on the role of India and China in cryptocurrencies prepared by M. Chandra Shekar, an assistant professor, and R. Kumaran, a researcher at the Institute of Public Enterprise in Hyderabad, India, while the second was a recent article by William Zuo, a blockchain expert from China and the founder of Gingkoo, a Chinese fintech company.
Zuo says that the Chinese government has already embraced the development and deployment of blockchain technology, while being very cautious about cryptocurrencies. It has put restrictions on Initial Coin Offerings due to fears of fraud, in order to protect consumers. However, it has also publicly endorsed blockchain technology. “To put it simply, China prefers blockchain to Bitcoin. The Chinese government is showing its support by investing heavily in next-generation technologies, including AI, blockchain, cloud computing, and big data.”
Shekar and Kumaran in their paper say that investing in crypto coins or other similar instruments is highly speculative as the market is largely unregulated. “Anyone considering it should be prepared to lose their entire investment,” he said. He mentioned that while countries like China, South Korea, France and Singapore took quick decisions to stop cryptocurrency trading, many others like India delayed their decisions, until early this year.
C. K. Vijaya Prasad, an independent currency trader in Hong Kong, is a devotee of the medium. “Though it is largely used as an investment tool, cryptocurrencies will find vast applications in daily transactions. The day is not far when one will be able to purchase items of daily necessity using cryptocurrencies rather than common currencies.”
Shekar and Kumaran, however, add that as long as countries such as China and India do not permit trading, bitcoins will not result in yields even after they are listed on the Chicago Mercantile Exchange.
Guo believes that rather than promote cryptocurrencies, the Chinese government will help bolster a new generation of blockchain giants the same way it has done with the internet giants, Baidu, Alibaba, and Tencent.
“Once this is achieved we may see a new dimension in the Belt and Road Initiative — the addition of One Chain.”
Prasad believes that one area where cryptocurrencies would be really useful is in currency markets. “When people travel across international borders, they need to exchange their country’s currency into that of the country that they have entered. This becomes a very troublesome task, and one often loses a significant amount of money due to exchange rate fluctuations. Sooner or rather than later, the majority of countries will be carrying out transactions using digital currencies, he predicted.
While the jury is out on the subject, there is one thing that I fail to understand and one that will prevent me from investing in them. Serious doubts linger about the tradability of such currencies and their valuations. Can something that has only an intrinsic value give huge returns? Maybe my Monopoly board has the answers!