The next time you're going to eat pizza, think of this name: Laslo Hanitz.
This Florida resident bought two pizza sandwiches for about $ 20 in 2010. Where's the problem?
Laslo used Bitcoin to pay for them, 10,000 Bitcoin to be exact.
Had Laslow saved these coins instead of spending them on pizza, his fortune would now be estimated at $ 580 million.
Lascelle did not lose everything, as he registered his name as the first person to use Bitcoin in a commercial transaction, and his young son finally enjoyed pizza.
The question that arises strongly now: What is the future of cryptocurrencies?
Perhaps we will find the answer in Asia!
Although the Bitcoin situation is not good, especially in India, where it will be banned, the position of cryptocurrencies is generally positive, and it also carries great benefits for the economies that will move first to take advantage of them.
For those who believe in cryptocurrencies, Bitcoin is the currency of the future, and they see endless possibilities in it.
It will undermine corrupt governments, empower the underprivileged, enhance financial inclusion among billions of people who do not deal with banks, help reduce global poverty rates, and replace the dollar by launching a global currency and new reserve assets.
Are those optimists right to see them yet? Not completely, the price of Bitcoin has risen 144 times faster than it was used in transactions during the past five years. This sharp fluctuation versus the limited use of Bitcoin in transactions (not many people buy pizza and pay for it in Bitcoin these days) means that it fails to meet even the simplest currency criteria: to be used as an acceptable exchange intermediary.
Moreover, the future of Bitcoin does not look good in Asia in the long term. We learned from the Great Depression a basic lesson that says that the currency should not be fixed in any country (fixing an official rate set by the authorities by pegging the currency to another country's currency or to a fixed asset such as gold). When consumers are afraid of the future - in the midst of a pandemic, for example - they will start hoarding money and stop spending, and because “what I spend is your income and what you spend is my income,” this causes a dangerous deflationary spiral, in addition to a lack of demand that leads to the collapse of prices and the reduction of investments, This ultimately leads to a depression in production and income.
The role of central banks is to stop this rapid collapse by increasing the supply of money to satisfy people's desire to hoard money and get them to spend again.
What makes Bitcoin a strong candidate to become a real currency is that the supply of it has a fixed number that will not change (the number of Bitcoin in the world will never exceed 21 million Bitcoin).
However, the matter will get worse, if policymakers in one country adopt the same currency as other countries (as is the case if Bitcoin becomes a global or regional currency);
They will lose the ability to adjust the exchange rate if faced with economic crises.
Just a decade ago, when Greece fell into the grip of an economic recession, the exchange rate could not be lowered to support the country's economic recovery by lowering export prices, because the country's currency (the euro) is a common currency with much larger economies, and none of them faces a similar crisis The result was a long and painful recovery for the Greek economy.
There is another scenario in which Bitcoin does not replace any of the Asian currencies, but rather is a parallel currency. However, this would pose a threat to the financial stability of many Asian governments. Many Asian economies, especially developing and emerging economies, have suffered from crises in the past due to the fluctuations of international capital flow, and these governments have taken measures to regulate these flows in order to maintain stability. And if Bitcoin - being a parallel currency - provided an opportunity to bypass these controls on capital; Soon it will be banned, which is now being proposed in India. Economies with a fixed exchange rate will also need to ban bitcoin, because speculators may use it to sell the local currency, which ultimately entails a collapse of the fixed exchange rate system.
The most likely scenario in Asia is that digital currencies become a natural occurrence, and cryptocurrencies become active outside the control of governments, and strengthen as a new type of digital gold.
Over time, their prices will stabilize, and they will be recognized as assets in the same way that investors rely on gold in the face of inflation and market fluctuations.
Then the dreams of solving the world's monetary problems of Bitcoin will go unheeded, and they will not be but another financial asset in the budgets of the rich.
Does this mean that cryptocurrencies generally have no future?
Despite the risks of unregulated cryptocurrencies, such as Bitcoin, the future of digital currencies is positive, and it is being shaped in Asia by governments seeking to make strides in digital payment systems, including the use of cryptocurrency technology.
There are already physical transactions using the digital yuan in major cities including Shenzhen, Chengdu and Suzhou, as consumers obtain the digital yuan through banks.
Gordon Clark and Prince Hernich, in an editorial for the East Asia Forum website in early April, demonstrate the booming currency and digital payment in Asia. Along with Cambodia, China is leading the world in spreading the digital currency linked to the central bank, while Singapore has cautiously reserved a niche for itself as a major player using a different methodology. In both cases, Asian economies were at the forefront of innovators, while avoiding bitcoin risks by establishing government sovereignty over the currency, not sharing a single digital currency with other economies, in addition to maintaining the ability to adjust the supply of their currencies.
The People's Bank of China has launched rapidly, since its inception of the digital currency project in 2014, to be the first in the world to launch a major sovereign digital currency: the digital yuan. According to Clark and Hernich in their article: "This currency will easily attract consumers, especially as they are accustomed to the widespread use of digital money, and then they will enable governments to fine-tune monetary policy locally by directly controlling the amount of non-cash money available (transactions that are not used). Where the printed money) ". They added, "There are already actual transactions using the digital yuan in major cities, including Shenzhen, Chengdu and Suzhou, as consumers obtain the digital yuan through banks."
For its part, the National Bank of Cambodia launched the "bakung" in October 2020. This money transfer service, which is available to retail customers, supports financial transactions in Cambodian riyals or US dollars.
The bakong has positioned itself as “the premier retail payment system managed by the central bank using blockchain,” and reportedly, a third of Cambodia's population owns a share of that bakong.
"Low barriers to entry have enhanced financial inclusion, which could bring about a real jump in economic activity similar to other regions of the world," Clark and Hernjic added in their article.
Bakong payment, Cambodia national backbone payment system powered by Blockchain, finally launched today after 15 months on pilot mode!
pic.twitter.com/0aZtp5l1eS
- Serey Chea (@SereyChea) October 28, 2020
As for Thailand, it is the other country in the forefront of countries in which the central bank issued a digital currency, focusing on instant bank transactions between individuals, and in sales outlets and stores using quick response codes (QR Codes), mobile phone numbers and bank account numbers. Clark Wahrnjic notes that the adoption of this technology has shown tangible results, as “nearly 70% of Thai bank account holders have registered for PromptPay, a service widely used among small retailers who no longer have to. To deal with liquid funds or supply changes. "
Cryptocurrencies promise significant and tangible benefits, ranging from significantly increasing financial inclusion, improving productivity, and increasing investment, consumption and growth as a result of a lower cost of capital.
But not all countries of the continent are moving together in this direction, as Clark and Hernich warn in their article that "the Philippines, the first country in Asia to support smart money phone payments since 2001, has not built on that leadership." At the top is any of the largest countries in the Association of Southeast Asian Nations (ASEAN) such as Indonesia. "
The benefits of digital currencies parallel huge benefits for those countries that have taken the first step, as investors favor the leading Asian economies digitally.
As the transformation takes place in that area, the pressure will increase on those Asian countries lagging in the digitalisation of the economy.
It is time to catch up or stay in the dark ages of criticism.
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Translation: Hadeer Abdul Azim
This report is translated from: East Asia Forum and does not necessarily represent the site of Maidan.