Cryptocurrency or digital currency, as it is better known has been garnering increasing attention from governments and large organisations in various parts of the world. This nascent form of currency has recently been dominating headlines and shaking up financial systems. The rising interest in digital currency is attributable to the phenomenal returns that are being realised in this area. While there is a myriad of opinions on the feasibility, stability and longevity of this type of currency; any financial institution that is not presently paying attention and understanding financial technology products such as digital currency, is placing itself at risk of being left behind in this highly competitive market.
Digital currency is created and held electronically with no centralized or regulatory governing body. It operates on blockchain technology which is in essence, a large electronic general ledger where every detail of every peer to peer transaction is stored and linked to anonymous but specific traceable digital addresses. Digital currency can be used to pay for Microsoft products, products at Overstock.com, book airline tickets on CheapAir.com, or hotel rooms from Expedia, and while it has not enjoyed widespread adoption, its potential as an investment has been compared to the investment return of having bought Amazon stock back in 1997. Testament to this is the meteoric rise of the value of Bitcoin from USD$950 at the end of 2016 to over $6 300 presently.
Regional advocates of digital currency think that it could be the way forward to solve or circumvent the quandary that many local banks in Caribbean countries have been facing. Over the past few years, anti-money laundering and de-risking measures and the subsequent state of banking relations have rendered persons and companies either “underbanked” or even “unbanked”. Digital currency is also being heralded as a solution for a large number of lower-income households in the region who are not currently with any financial institution.
It is in part to this end, that the company Bitt Inc. which has its roots as a Barbados-based financial technology start-up, has been operating in the Caribbean and the Americas and has been positioning itself to become the “heart of the Caribbean financial system”.
Critics of digital currency generally cite the volatility of this platform and the fact that since digital finance at present does not need to follow the stringent liquidity capital rules imposed on financial institutions, there are very real risks of total loss in the event of litigation or bankruptcy. Some have surmised that due to the anonymous nature of cryptocurrencies, they will continue to be used to launder money, evade taxes and perhaps finance terrorism.
Regardless of the critics, the one thing that we know that is constant in life is change, and technological change is advancing in leaps and bounds. The financial system now has to keep up with technology. With each new technology and change in the way we engage and experience the world, so too will alternative uses of these technologies for nefarious purposes become more prevalent. Let us not let the negatives stop us from investigating the concept of embracing something that is on the cusp of greatness. Digital currency will be part of the future!