BANGKOK (THE NATION/ASIA NEWS NETWORK) - Central bank authorities in several countries are taking steps to prevent fraud involving bitcoin and other crypto-currencies while exploring other applications related to the blockchain technology that underlies these digital units.
Bitcoin and the like were born out of the quest to decentralise authorities via the use of distributed ledgers that ensure consensus-based security. Among their targets are central banks around the world, which will not endorse crypto-currencies beyond their centralised control.
While bitcoin and the like are not legal tender in most countries, a growing number of people have turned to the digital units as a means of payment, with high hopes they one day will become the standard unit universally.
In Thailand, the bitcoin frenzy is still in the early stage, with a few cases of potential frauds being pursued by the Department of Special Investigation. In these cases, innocent investors have been lured into investing in bitcoin and other digital units with a promise of lucrative returns. These cases, which are essentially Ponzi money schemes, are illegal under Thai law, even though bitcoin and the like are not outlawed at this stage.
In addition, some Thai establishments, such as coffeeshops and bistros, have offered to accept bitcoin at their own risk due to their perceived trendiness and the entrepreneurs' personal obsessions with the new currencies.
Since bitcoin's value has been highly volatile, it is hardly a reasonable medium of exchange. Quoted at around Bt481,000 (S$19,826) per coin at this time of writing, the unit has ridden a roller-coaster most of the time as demand and supply alone dictate its value. Economic fundamentals and other key factors are not taken into account, while speculation is the key driver.
In the real world, currency stability is probably one of the most important factors for a stable financial system and prosperous economy.
Despite their shortcomings, bitcoin and its ilk have the potential to modernise the global financial system and economy and, as such, are being explored by authorities in various countries. For example, central banks might decide to create their own digital currencies using the private blockchain and retain control of the units to aid in the management of monetary policies and exchange-rate regimes.
For proponents of bitcoin, the problem with fiat currencies - those we customarily use, such as the US dollar and Thai baht - is that they are hardly transparent, since their value is essentially based on the strength of the government issuing the units.
But fiat-currency advocates would say they are a significant improvement on previous units used, which were based on the value of gold or silver or other precious metals. That was the system abandoned by the United States in the mid-1970s, and subsequently by other countries.
Now that bitcoin and other digital units are drawing so much attention, it becomes necessary to educate the public about their potential drawbacks and strengths. While it may not serve the public interest to outlaw the new forms of currency, it is imperative that fraud be prevented in their use, such as in money laundering, along with other undesirable consequences of the new technology, before potential damage escalates to uncontrollable heights.
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