First it was the Russians and a talk of their own national CryptoRuble; Kyrgyzstan then said they plan to create their own national cryptocurrency backed with gold (a quaint yet modern idea!); the Swedish central bank proposed an e-Krona; and China is testing a cryptocurrency too.
But for me, the biggy is that the Bank of England announced in 2015 that it had produced a theoretical currency called RSCoin. I was with Mark Carney, the Governor of the Bank of England, and also with the Chancellor, Phillip Hammond in India at the UK India Fintech Conference which I hosted. And I can tell you I have never heard a more technology embracing pair of people who are meant to be slow and sedate.
Why a national cryptocurrency?
One of the biggest attractions with cryptocurrency over other types of currency that are currently available is that it can be sustained anonymously and have zero ties to a financial institution or country. A series of governments are now very worried about the idea of bitcoin and these currencies because customers would be able to make sustainable ongoing transactions and payments without having to ever introduce the use of a typical financial model or banking system.
Bitcoin allows customers to transfer large amounts of money between each other without the authorities being able to track the money, this makes it extremely difficult to tax an extremely easy to launder money as well.
In order to combat this potential threat is series of countries including major central banks like the Bank of England and the Bank of Israel will be launching their own version of a cryptocurrency. Using some of these cryptocurrencies which are linked to banks can come with some massive advantages with customers.
National benefits to you and me?
Perhaps one of the greatest advantages is that these cryptocurrencies will not come with the same price fluctuations that have been seen by bitcoin. This is because the value of the crypto current user directly tied to the financial transactions that are completed by a bank. Any of the systems for electronic payments and transfers will involve a series of banks across the country and this means that all of the data associated with the national cryptocurrency will be tracked/taxed and non-anonymous. Current cryptocurrencies are completely able to bypass all of this clearing and the process of data and in many cases this can come as a huge advantage for anyone that is trying to trade cryptocurrency or goods and services without any type of taxes.
What it means for existing cryptos
There is a great speculation on what will happen as soon as national cryptocurrencies start rolling out. Bolstered by the success of bitcoin it’s likely that many of these national cryptocurrencies will have an automatic public trust as soon as they launch. Crypto will go mainstream. Their credibility and so their demand as a store of value or just the perception will likely see demand boost even more.
I currently get about a dozen emails a week from people asking how to trade or invest in crypto. I’ve not seen that since the days when 20 years ago I wrote Trading Online (Financial Times) at the peak of the online trading boom. I know there have been days when applications have flooded to brokers such as 24option and their customer service has a backlog of account opening forms.
Extensive research on the part of the Bank of England has been studying various cryptocurrency market since the year 2015 in order to start work on their own cryptocurrency.
With such extensive research and improve public trust it could be only a matter of time before customers are able to deposit their money directly into cryptocurrency accounts with their central bank. This can cut out all of the various complications that currently stand in the way with cryptocurrency investment.
Many top authorities in the UK including the Governor of the Bank of England have suggested that bitcoin at present does not represent any type of financial stability issue. As the size of current investments in bitcoin only represent a market that is around half that value of Apple.
As more national cryptocurrency options come forwar, however, this could represent a chance to invest in many markets each with the country of creators setting the total size of the cryptocurrency pool available. At present, a national cryptocurrency does not offer a direct threat to bitcoin and bitcoin does not offer a direct threat to the national banking system. As soon as changes become implemented and the market gets flooded with national cryptocurrencies however, although some say we could start to see the strength of bitcoin fall, I think it will rather raise the value of existing popular Cryptocurrencies, and especially those such as Ripple whose underlying blockchain technology, rather than reinventing the wheel, the Bank of England is likely to use.
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Disclaimer: CFDs are leveraged products that involve substantial risk and may result in the loss of your entire balance. Cryptocurrencies entail high volatility and may result in significant losses over a short period of time.
The content of this article constitutes Marketing Communication and does not qualify as Investment Advice or Investment Research. This article is produced by Alpesh Patel . Any views or opinions presented within this article are solely those of the author and do not necessarily represent those of 24option. The article is of a general nature and does not take into consideration individual readers’ personal circumstances, investment experience and current financial situation. 24option accepts no liability for the content of this article, or for the consequences of any actions taken on the basis of the information provided.
Further reading: An investment guide to cryptocurrencies