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Cryptocurrencies: Will Central bankers board the train?

Two weeks ago, in December, the Bitcoin price plummeted. Within just 9.5 hours, the cryptocurrency lost more than ten percent. And eventually it dropped 17 percent on the virtual floor within 48 hours.

Published: December 27, 2017, 11:07 am

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    The possible cause: A single Japanese insider sold his bitcoins in large quantities. With his corresponding message on Twitter, the sell-off apparently only really got going. On Friday morning, the currency traded on various trading platforms to under $13 000, heading for $12 000.

    To top it off, it also became public that the South Korean intelligence service suspected state hackers from Communist North Korea of ​​stealing more than $80 million in cryptocurrencies.

    Affected in February 2017 was the South Korean platform Bithumb – one of the five largest in the world. Some 1.47 million registered users exchange around ten percent of all Bitcoins available worldwide.

    In the face of such turbulent developments, more than ever, the question arises: “To regulate or not to regulate?”

    Will cryptocurrencies be used for state control measures? The answer varies from country to country and depends, above all, on the local economic tradition.

    But not all decision-makers watch the development in this area with doubt, skepticism or even fear. A consensus on how to deal with the emerging economic power outside of conventional control, is far from being realised. The guardians of the world economy are divided.

    In particular, the authorities in four European countries believe that they have recognized the potential of cryptocurrencies. Currently, Estonia, Sweden, Norway are planning their own virtual currencies.

    Estonia is leading the pack of hopeful regulators. Bitcoin, Ethereum, Ripple and all the other cryptocurrencies need not fear regulation in the Baltics soon. Rather, the Estonians are already working on their own national cryptocurrency, the Estcoin.

    The Swedes are also making plans. They have wanted to be the first cashless country in the world for some time now, also with the help of Blockchain, Bitcoin’s technical platform. It has been known since 2016 that Sweden is researching an appropriate solution for its Blockchain register entries. At the end of May 2017, the test phase was successfully completed.

    Norway’s authorities are also refraining from regulating Bitcoin and are planning their own coins instead. The Netherlands are at the top of the list. While the country has some commercial banks working on their own wallets and those have even set up Bitcoin machines, the central bank has already started its own crypto currency: the DNBcoin.

    As Bitcoin and other cryptocurrencies become more important, many more governments will surely jump on the bandwagon.

    But this is not really a cause for joy. At this point, the basic idea of ​​Blockchain technology has been called into question: the decentralized authentication and transaction of ownership.

    Bitcoin and Co. enable the transfer of values ​​without supervising and regulating intermediaries. It is questionable whether a cryptocurrency issued by central banks will comply with this basic rule.

    Central bankers are increasingly thinking about possible measures to control the cryptocurrencies. In the future, we will certainly be able to observe more than less regulation, and political action may follow soon.

    Shmuel Hauser, the chairman of the Israel Securities Authority, wants to ban companies based on bitcoin and other digital currencies from trading on the Tel Aviv Stock Exchange.

    Singapore’s central bank last week issued a warning against investment in cryptocurrencies, saying it considers the recent surge in their prices to be driven by speculation and that the risk of a sharp fall in prices was high.

    Bitcoin extended its recovery in holiday-thinned trading this week, rising more than a third from last week’s lows.

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