Digital currencies

Muna Al Fuzai

The Venezuelan president recently said that his country plans to launch a new digital currency to cope with the financial crisis caused by the financial embargo imposed by the United States. The new currency will be called “petro”, and will enjoy guarantees from Venezuela’s oil and gas reserves and natural resources of gold and diamonds.

The Venezuelan president said the move will allow for new forms of international funding for economic and social development in the country. I believe the man has to do what he has to do to save and protect his country, and if issuing a new digital currency is one way for a solution, so be it.

The statement led to a debate among many people. The new Venezuelan digital currency will be guaranteed by certain factors by the government, but it is not the only virtual currency in the cloud today, which is filled with crypto-currencies that entered global markets and caused a media uproar. Will the world see new changes in financial transactions? How will governments face it, and should individuals resist the temptation to deal with these currencies?

As Venezuela is on its way to issuing the new virtual currency, the world is witnessing a strong surge of another digital currency – bitcoin – causing confusion and a race by some people to get hold of it. More companies are encouraging and training people to use this new currency online. I wonder if virtual currencies such as bitcoin and others are legal or not. Are we waiting for more virtual currencies which may be supported by governments, such as the case is in Venezuela? The matter is still under discussion.

The digital currencies have several different names and are usually referred to as digital, virtual, encrypted or electronic currencies. Yet I keep thinking if it is just a bubble that will soon burst, or a genius invention that will change the face of financial transactions in the future. There is a split in opinions among individuals and financial institutions on this subject. While some are thinking of buying all they can of the new virtual currencies, some are hesitant to avoid losses.

I think that in the case of bitcoin, there are no logical reasons for its high price, as it is now. The Reserve Bank of India has refused to consider it a legal currency. They are right in seeking to protect their resources and reputation. But there are some people and a few governments who believe that virtual currencies will change the face of the world in the future.

In my opinion, crypto-currencies are a brilliant invention, but there have been no significant changes to the lives of individuals or investments after years of their launch, which makes me worried. In addition, the sharp and sudden fluctuations in rates without good or apparent reasons make it an investment fraught with dangers and more akin to gambling rather than an investment.

But if financial institutions are persuaded to adopt crypto-currencies as legal tender that eliminates the typical problems of everyday currencies such as counterfeiting, for example, by providing users and traders of these currencies with adequate safeguards to protect their money and control possible attempts of money laundering, then it would bring a new change to today’s world.

But it seems that so far, the old school of financial institutions has not granted its approval to such an upgrade. I think the world needs to support new financial tools, but only if enough international guarantees are given, such as in the case of Venezuela, for example. It might be worth thinking and considering then.

By Muna Al-Fuzai
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