In the beginning, there was man, grain and bartering. Since then, human beings have revolutionised the exchange of goods and services by introducing a standard exchange rate, paper currency, and non-precious coinage. And then, just like that, technology took the world of money by storm and introduced magnetic ink character recognition and the oh so convenient automatic banking machines.
Chip and pin technology has given us more security in the palm of our hands, and internet banking makes banking and shopping from the comfort of our home a reality that wasn’t possible a few generations ago.
As lifestyles progressed, science and technology have moved at an alarming rate to simplify life. Accessibility, instantaneity and hassle-free transactions have birthed a tool resembling something straight out of a dystopian film, cryptocurrency.
Difficult for most to understand and nearly impossible to regulate, cryptocurrency makes money, as we know it, appear Jurassic in nature. Simply put, cryptocurrency is a form of payment that can be exchanged online for goods and services.
Over the last few years, Bitcoin has become a poster child for cryptocurrency, but according to CoinMarketCap.com, more than 10,000 different cryptocurrencies are traded publicly. In addition, the total value of all cryptocurrencies as of May 27, 2021, was more than $1.7 trillion.
Cryptocurrencies are primarily based on a decentralised technology known as blockchain with inherent encryption, distributed among users via the internet. This blockchain is an open, distributed ledger that records transactions in code and practice and operates like a chequebook distributed across countless computers worldwide. Transactions are recorded in “blocks” that are then linked together on a “chain” of previous cryptocurrency transactions.
I suppose its main selling point is that it’s a medium of exchange that is digital, encrypted and decentralised. What this means is that the system that runs and operates cryptocurrencies is not owned or controlled by a single entity, such as a government, bank, or company. Instead, the product is run and maintained using the computing power contributed by a global network of participants.
According to Forbes Advisor, unlike the US dollar or the TT dollar, there is no central authority that manages and maintains the value of a cryptocurrency. So essentially, cryptocurrency doesn’t fall under the ambit of the Central Bank of Trinidad and Tobago. To users, this lack of control releases them from the bonds of capitalism and grants them the freedom to do anything that its value can buy. But to world leaders, this is a dance with death and can potentially unleash the wrath of Pandora if not adequately monitored.
Unregulated cryptocurrencies undermine the work already done by financial institutions globally to combat money laundering and terrorist financing, yet there are varying approaches on how cryptocurrency should be managed. For example, in Algeria, Egypt and Iran, there is a complete ban on its use, while other countries like Switzerland and Denmark are developing regulatory frameworks on taxation and money laundering to bring cryptocurrency under government control.
In the Caribbean, there are also varying views on the use of cryptocurrency. The Dominican Republic government banned the use of cryptocurrencies in transactions; but its use is still widespread, and citizens continued to use it at their own risk. In Antigua and Barbuda, the government is in the process of drafting laws to regulate Bitcoins. Surprisingly, data collected suggests that Antiguans are interested in using cryptocurrency to pay for public services, especially since its economy thrives on the tourism sector. Interestingly, officials believe that Bitcoin makes it easier to track transactions, which is very important, considering how many view this Caribbean country as a “tax harbour.”
In TT there are no laws governing cryptocurrency, and as a result, regulation proves to be near impossible. A joint statement issued by the Central Bank, Securities and Exchange Commission and the Finance Intelligence Unit highlighted that “virtual currency is a digital representation of value that can be digitally traded and functions as a medium of exchange within a specified online community, but does not have legal tender status in Trinidad and Tobago and in most other jurisdictions… Providers of virtual currencies are neither regulated nor supervised by the Authorities… Virtual currencies tend to be volatile, and their value can fluctuate significantly.” Further warnings have been given surrounding the potential for fraud and liquidity risks.
Technology, through cryptocurrency, has yet again granted us another dose of freedom, flexibility and control. But with a long list of foreseeable risks and the potential to dismantle the world’s economy, has technology pushed us to bite off way more than we could chew?