Advantages and Disadvantages of Cryptocurrency
Discuss about the Influences of Cryptocurrency on Economic Growth.
The real economy refers to that part of the economy that is concerned with the actual producing of the commodities whereas the other part of the economy is concerned with the transactions in the financial market that includes buying and selling of the goods and serviced that have already been already produced. When it comes to the economy of Singapore, it is a highly developed free market that has been ranked as the most open economy in the world. The economy of Singapore is also known for it quality of being the least corrupted pro-business in the world. The crypto currency refers to the recent trends in the currency policy in the global economy (Narayanan et al., 2016). The digital asset is used as a medium of exchange. it is also known as virtual currency and electronic money. The fist crypto currency was created in the year 2009, known as Bit coin. Since then, many other crypto currencies are used like the Altcoins. Singapore, being the most techno-savvy has adapted crypto currency like the Bit coins as the online exchange for transactions, as they are free from regulations and faster mode of digital exchange.
Research Question:
The research question formulated for this study at hand is as mentioned below:
- What is the effect of the Crypto currency in the real economy of Singapore?
Research approach:
- The study has considered the use of deductive approach to resolve the questioned that has been aroused. The deductive approach would help in explaining the relationships between the concepts and the variables and make the quantitative measurements. It links the various theories that have been identified in the research.
In the year 1983, a cryptographer in American named David Chaum conceived the e- cash, which is cryptographic electronic money. In 1995, he implemented it through Digital Cash, which is an early form of cryptographic electronic payments that requires the use of a software in order to extract notes from a bank and allocate particular encrypted keys before it can be sent to a receiver (Young, 2017). This allowed the crypto currency to be undetectable by issuing the government, bank, , or a third party.
There various advantages and disadvantage of crypto currency in the real economy of Singapore, according to the handbook of Block chain, Digital Finance, and Inclusion, by Chuen, & Deng, (2017) the advantages of crypto currency is that it is one of the most easily accessible mode of exchange. The digital money is readily assessable by the public as it is a decentralized operation and the investors from all over the world can use this technique. The process of making payments in the crypto currency economy is easy, within seconds without the use of any kind of financial instruments. The payments of the transactions can be made. Moreover, the transactions made with help of crypto currencies are highly secured as it uses the NSA cryptography. Until and unless it is hacked there is no risk attached with it. However, as per Hayes, in his empirical study leading to a cost of production model for valuing bit coin, (2017), he argues with the above discussion and therefore, he highlights the various drawbacks of the same. Since it is a new concept and needs a sound learning curve. People may invest without any proper knowledge and lose money to something they are not aware of. In addition to that, there is a possibility of losing all the money that is invested. Moreover, the money is stored in the form of digital currency on the phone; the passwords and the security password are needed to be remembered, losing the bit coins means that the user will not be able to recover it, even with the help of authorized support. Therefore it is one of the limitation of the of Bit coins.
Government Regulations and Policies on Cryptocurrency in Singapore
According to government of Singapore, they are making efforts to regulate and explore the process of crypto currencies. Since the use of digital money has been effectively used by the organizations of Singapore for manufacturing the products and service, the government is making a plan to legitimate a stable market that wills benefit them as well as the investors (Blankenship, 2017).
As crypto currencies are evolving the and trying to keep up with the technology of block chain the economy of Singapore is keeping up with this new trend that is likely to be used extensively (Yamada, Nakajima & Sakamoto, 2016). Central banks worldwide are supervising on this occurrence. The director in charge of managing of the Monetary Authority of Singapore (MAS) Ravi Menon recently announced that the government of Singapore would supervise the risk market, but will not control crypto currencies for the time being. The chief impulsion for the formation of Bit coin is a result of the worldwide financial crisis and the resulting concerns about the fragility and opacity of the global system of banking. This os one of the factors that motivated to create the bit coins in 2009 when it was launched by Satoshi Nakamoto.
As said in the hand book of Lim “A Facilitative Model for Crypto currency Regulation” (2015), the Economy of Singapore that plans to be a “Smart Financial Centre”, is among the pioneers in this concept along with other countries who are adopting this concept like Australia, Canada and South Korea. The Monetary authority of Singapore (MAS) has been exploring the usage of digital money in Singapore to make a smooth progress of the interbank costs. It is with such tests that makers of policy can judge how to best exploit their repayment in terms of contracts which are smart and reduced costs of transfer of funds, especially payments if cross-border, for instance while putting in place suitable policy and disclosure necessities to minimize various risks by virtual currencies (Chuen & Deng, 2017).
As mentioned by Utomo, Makers of policy also need to work intimately with industrialist to recognize the practicalities and sustain dialogue with regulators in other countries because of the global scope of the issue (Utomo, 2018). The MAS and the Hong Kong Monetary Authority (HKMA) in recent times signed an agreement to make a collaboration on projects based on technologies of block chain.
In the working paper named Liquidity Regulation, Extended Repo and the Real Economy (Allen & Gale, 2016,) debated that crypto currencies and fintech could benefit from advanced research projects. Despite the explosion in crypto currencies, there has been limited academic work in the area there might be scope in Singapore to launch a large-scale research policy project on issues related to technology of block chain, central banking policies, and the impact on how services in the government could be delivered.
Hayes has critically revealed in his journal ‘Crypto currency value formation’ that there are valid concerns about fraudulent and laundering of money or any other activities that are illegal including the terrorism of finance due to the unidentified transactions nature, and the limited regulatory structure to administer transactions concerning digital tokens (Hayes, 2017).
Moreover, the activity in question can change quickly, as was the case with the recent bit coin split. Technical questions about the block chain provoked the currency to diverge into two branches: the new off shoot known as bit coin cash and bit coin; another divide into bitcoin gold is said to have occurred recently. Regulation schemes must thus be prompt to be helpful (Li & Wang, 2017).
Conclusion
The rise of crypto currencies and Initial Coin, from the perspective of financial stability offering in Singapore may not have systemic risks due to their hitherto limited linkages with the broader financial system and real economy. But, if the concept of Crypto currencies in Singapore becomes more prevalent in their use, they have cleared prospective for systemic risks. In addition, if crypto currencies are more broadly used, it will have considerable affect on the effectiveness and conduct of financial policy, issuance and use of the currencies like legal tender.
References
Allen, F., & Gale, D. (2016). Liquidity Regulation, Extended Repo and the Real Economy. Working Paper, Brevan Howard Centre, Imperial College, London.
Blankenship, J. R. (2017). Forging Blockchains: Spatial Production and Political Economy of Decentralized Cryptocurrency Code/Spaces (Doctoral dissertation, University of South Florida).
Chuen, D. L. K., & Deng, R. H. (Eds.). (2017). Handbook of Blockchain, Digital Finance, and Inclusion, Volume 1: Cryptocurrency, FinTech, InsurTech, and Regulation. Academic Press.
Hayes, A. S. (2017). Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin. Telematics and Informatics, 34(7), 1308-1321.
Li, X., & Wang, C. A. (2017). The technology and economic determinants of cryptocurrency exchange rates: The case of Bitcoin. Decision Support Systems, 95, 49-60.
Lim, J. W. (2015). A Facilitative Model for Cryptocurrency Regulation in Singapore. In Handbook of Digital Currency (pp. 361-381).
Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Princeton University Press.
Utomo, G. O. T. (2018). THE INFLUENCES OF CRYPTOCURRENCY ON ECONOMIC GROWTH: CASE STUDY OF BITCOIN IN 5 ASIAN COUNTRIES 2011-2016 PERIOD. Jurnal Ilmiah Mahasiswa FEB, 6(2).
Yamada, Y., Nakajima, T., & Sakamoto, M. (2016, November). Blockchain-LI: A Study on Implementing Activity-Based Micro-Pricing using Cryptocurrency Technologies. In Proceedings of the 14th International Conference on Advances in Mobile Computing and Multi Media (pp. 203-207). ACM.
Young, J. (2017). Bitcoin and Cryptocurrency Technologies: The Ultimate Guide from Beginner to Expert.
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