There has been a gradual rise in the adoption of cryptocurrencies, and rightfully so. Cryptocurrencies have the potential to become huge disruptors to global financial systems in that they intend to perform the same functions as the traditional fiat currencies, but more efficiently. Cryptocurrencies are known to be digital assets, native primarily to a chosen network of interconnected devices. They can either be transacted basically as a utility (i.e native to a particular sector) or on a broader scale where they are bought and sold for a price determined by market conditions. They are traded on exchanges similar to the stock market, where investors buy and sell cryptocurrencies just like they would buy and sell shares on the stock exchange.
Cryptocurrency is extremely unpredictable and volatile, especially since it has no intrinsic value. This volatility is a main feature of cryptocurrencies, and the main reason the UK’s financial regulatory authority, the FCA, has described cryptocurrencies as high-risk, speculative investments that could potentially lead to a total loss in investment due to manipulations that can occur as a result of individual or institutional factors. Despite this, crypto has massive support from the financial industry. Institutional investors and companies like Tesla, and investment banks and financial services firms like JP Morgan, include Bitcoin in their portfolios.
Despite the growing popularity, there are few consumer protections and regulations for cryptocurrency, and in the wake of this many fraudulent activities are on the rise based on the supposed feature of anonymity that cryptocurrencies operate upon.
Legal Concerns Around Cryptocurrency Use
The U.S. Attorney General’s cyber-digital task force 2020 report identified three areas of concern with cryptocurrency use:
- Direct use of cryptocurrency to commit crimes and finance terrorism
- Using cryptocurrency to launder money and evade taxes
- Cryptocurrency theft and investment fraud.
In general, a common legal concern about cryptocurrency is the level of anonymity that cryptocurrency can offer. This creates a perfect environment for criminal activities. Cryptocurrency developers are now offering anonymity enhanced cryptocoins (AECs) like Monero, Zcash, and Dash, specifically to make tracking transactions more difficult.
With all of these in view, the regulations and policies around cryptocurrencies and their adoption in different countries of the world literally differ from each other. While a nation such as Nigeria would ban financial institutions from performing any form of transactions using crypto currencies, owing to the basic ideology that it fosters more harm than good in the nation, countries like the United States would adopt the use of cryptocurrency for the enhancement of financial transactions.
Comparative Summary of Regulations
One of the most common actions identified across the jurisdictions of different nations is government-issued notices about the pitfalls of investing in the cryptocurrency markets. Such warnings, mostly issued by central banks, are largely designed to educate the citizenry about the difference between actual currencies, which are issued and guaranteed by the state, and cryptocurrencies which are not. Most government warnings note the added risk resulting from the high volatility associated with cryptocurrencies and the fact that many of the organizations that facilitate such transactions are unregulated. Most also note that citizens who invest in cryptocurrencies do so at their own personal risk and that no legal recourse is available to them in the event of loss.
Many of the warnings issued by various countries also note the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism. Some of the countries surveyed go beyond simply warning the public and have expanded their laws on money laundering, counterterrorism, and organized crimes to include cryptocurrency markets, and require banks and other financial institutions that facilitate such markets to conduct all the due diligence requirements imposed under such laws. For instance, Australia, Canada, and the Isle of Man recently enacted laws to bring cryptocurrency transactions and institutions that facilitate them under the ambit of money laundering and counter-terrorist financing laws.
Some jurisdictions have gone even further to impose restrictions on investments in cryptocurrencies, the extent of which varies from one jurisdiction to another. Some (Algeria, Bolivia, Morocco, Vietnam) ban all activities involving cryptocurrencies. Qatar and Bahrain have a slightly different approach in that they bar their citizens from engaging in any kind of activity involving cryptocurrencies locally, but allow citizens to do so outside their borders. There are also countries that, while not banning their citizens from investing in cryptocurrencies, impose indirect restrictions by barring financial institutions within their borders from facilitating transactions involving cryptocurrencies (Bangladesh, Iran, Nigeria, China, and Colombia).
While Bitcoin and other cryptocurrencies have generated dizzying returns for investors, there are significant risks and regulatory issues to consider. There are very few consumer and investor protections that address cryptocurrency, and the exchanges that deal in it.
The Digital Tender: A Game Changer?
2 billion people still lack access to formal financial institutions according to data released by the World Bank. This implies that a wide gamut of individuals across the globe are constantly stripped of their financial rights and left in the shadows. This is true of the sophisticated systems of traditional paper transactions that are rarely encouraging and laden with obscurity.
With this in mind, it is only right that we outsource innovative channels that will provide the vast majority of people with affordable means to manage their financial lives and grow. This must be acted upon in a bid to maximize opportunities for people to express their financial freedom using a secure, affordable, and qualitative approach.
Presently, the financial space is abuzz with a ‘fresh’ type of currency. One that is fast gaining momentum and seeks to achieve a satisfactory ambition. Digital currencies in today’s economy have been observed to hold the potential to completely revolutionise how money is perceived in society. The influx of cryptocurrencies such as Bitcoin, Ethereum and a host of others has, over the years, topped off several conversations on the role that these electronic currencies might play and how their seeming prospects could be utilized to foster growth and financial inclusivity. Regardless of the nature of the transition that a country may adopt, it is needless to say that a legally issued digital currency will be a welcome initiative. It will further provide businesses with the avenue to flourish through a safe and timely financial instrument as the digital currency.
Moreover, with the countless challenges that plague paper currency transactions, digital currency offers a decent consolation. It satisfies the people where they are and augments their monetary options. The inflation rates across Africa are largely dismal. In Nigeria, it stands at a sorry state of 18.2% — and shows no signs of slowing down. A digital currency will surely serve as insurance against uncertain waves. It is simple, seamless and guarantees a decent store of value. Sounds like a smart choice, right?
Also, a recent report by the Bank of America admits the intrinsic value that digital currencies have in emerging economies if fully embraced. The President of El Salvador, already leading the charge, announced this year on June 5th that he has commenced plans to make digital currencies a legal tender in the country. The acceptance of digital currency by a nation’s central bank will also ensure that transactions are conducted credibly. It will inevitably block leakages and occasions of fraud in the financial landscape. Not only that but there will also be a huge reduction in administrative and operational costs which is incurred by the government.
On the flip-side, however, several obstacles ranging from volatility, regulatory problems, issues of privacy and trust may hinder widespread acceptance of a decentralised tech–currency. Yet, having a global consensus to fashion a regulatory framework on the digital currency mantra will by far assuage some of these challenges. It is only a matter of time. “There are of course barriers to mainstream adoption, but they are far from insurmountable,” says Iqbal Gandham, the UK Managing Director of eToro.
How the Prospect Of A Central Bank Digital Currency Will Redefine The Banking System In Nigeria
The advancement of digital technology has transformed how payments and other financial services are conducted. Cash, which used to be king, is now giving way to digital forms of currencies. Central Bank Digital Currencies (CBDCs) are one of the digital alternatives to cash with a very promising potential for disrupting existing financial systems. CBDCs are blockchain-inspired virtual forms of a nation’s fiat currency. Although CBDCs are similar in design to cryptocurrencies, they are centralized, unlike cryptocurrencies, and are issued by the central bank of a nation.
An interesting feature of a CBDC system is its capability to facilitate payments directly between multiple parties without requiring intermediaries such as payment settlement institutions, payment systems operators, or clearing houses. This could be a potential problem for intermediaries in the financial system because this kind of system will eliminate the need for intermediaries that exist in the present traditional payment system, hence, threatening their survival due to significant revenue drop that would follow.
The choice of storage and exchange design of CBDC would affect how much impact its usage will have on banks and other intermediary financial institutions. If third-party providers of financial services, like fintechs, are allowed to keep CBDCs and also provide payment services that are related to traditional fiat currency, banks will be significantly impacted from the introduction of CBDCs because customers will be able to keep the CBDC on wallets they have with non-bank third-party providers, thereby, reducing the need for banks. Also, if the exchange of CBDC to fiat currency is restricted to the central bank only, banks will be hindered from making profits associated with the fees for the exchange between CBDC and fiat currency.
When CBDCs become alternative payment systems, a decline in the volume of card transactions would be inevitable, as more transactions would be done with CBDCs. This, in turn, will cut down the revenue that financial institutions generate from interchange fees associated with card transactions.
Although the issuance of CBDCs could stiffen the growth of the traditional banking system in a country like Nigeria, it could also positively transform how financial services are offered. A CBDC in Nigeria will provide better security for customer’s funds because, by its nature, each digital naira will possess a unique identity, which allows it to be tracked continuously by the central bank. Since CBDCs may also leverage blockchain technology, there is a lower chance that a CBDC would be counterfeited or illegally modified.
For a country like Nigeria with a high number of underbanked citizens, a CBDC could strengthen financial inclusion by providing underbanked citizens access to a wide pool of financial services that they would not have had access to with today’s traditional banking system. This would also reduce the need for bank branches to be present in rural communities in order to facilitate the distribution of cash to members of those communities.
The integration of CBDCs into Nigeria’s financial system is expected to lower the cost of monetary transactions, accelerate economic growth and stabilize the country’s financial sector. The severe effects of the drastic devaluation of the naira could also be mitigated with the issuance of a CBDC. While the issuance of a CBDC comes with its pros and cons, there is no doubt that the issuance of a CBDC would have tremendous positive impact on the Nigerian economy, as well as on how financial services are offered in the country.
The future of healthcare with blockchain
Blockchain technology was designed to provide a shared distribution ledger that securely manages data, without requiring any central authority. In the healthcare industry, where data is becoming increasingly pivotal, blockchain offers a leverage to improve medical healthcare systems. This compels healthcare providers to find innovative ways to apply blockchain in healthcare.
A 2017 IBM Institute for Business Value blockchain study, Healthcare Rallies for Blockchain, reports that, of the 200 healthcare executives from 16 countries that participated in the survey, 16% expected to implement a commercial blockchain solution in 2017, while 56% expected to by 2020. The healthcare industry is already aligning itself with the blockchain-powered future of healthcare.
For the pharmaceutical industry, blockchain may be the next technological revolution that will transform the future of pharmaceuticals. In the field of pharmacy, blockchain will provide a means to ensure supply chain integrity and facilitate the use of safe drugs. Chekkit is a typical example in this case. Drugs hold the keys to both life and death, depending on which drug you use and how you use it. Blockchain’s ability to achieve drug traceability will facilitate the tracking of drugs along the supply chain and provide end consumers with information on the integrity of the drug. Given the enormous counterfeit pharmaceutical industry today, and the deaths and medical complications that arise from the use of counterfeit pharmaceuticals, the application of blockchain in this area will be invaluable.
Apart from saving lives, the reduction of counterfeit drugs will drastically reduce the 200 billion dollars that is lost annually by pharmaceutical companies worldwide, due to the production of counterfeit drugs. The recovered funds can be invested into the development of better drugs to improve global healthcare.
This is an era of data, and every industry is seeking to harness the power of data. The healthcare industry is not an exception. An average person lacks easy and secure access to their own medical records, even with the advancements in Electronic Health Record(EHR) solutions. With just a smartphone, most people can access their financial data and other forms of data. Blockchain will improve the accessibility of medical data, in a secure manner, just like that of every other kind of data that is readily available to smartphone users today. With just a smartphone, anyone will be able to carry their medical record with them, anywhere they go. This will provide the chance for patient engagement in healthcare.
This will also allow the medical records of patients to be accessed easily and securely, by any healthcare provider who needs it. Since the data is stored on a blockchain, its security is assured and, hence, cannot be tampered or accessed by just anybody. With the application of blockchain in this area, patients will have access to all their medical history across all healthcare providers that have attended to them. This data can be shared securely when they visit a new healthcare provider, which will eliminate confusion and serious complications that can arise from the duplication of healthcare records across different healthcare facilities. It will also eradicate the time wasted on trying to obtain the health records of a patient from their previous healthcare provider(s).
The privacy of all medical data will also be guaranteed with blockchain.
Additionally, since blockchain will facilitate the development of a singular health record system that cuts across EHRs, different regions and all medical history from the lifetime of a patient, AI can be leveraged to extract meaningful insights from a patient’s lifetime medical records to provide personalized recommendations that will improve the medical outcomes for each patient. Also, patients who are willing to, can offer medical researchers the access to their medical records. Blockchain will make this secure sharing of data very achievable. Their data would be used anonymously in medical research. This can improve the development of groundbreaking medical research and innovation.
Health insurance is another aspect of healthcare that stands to benefit greatly from blockchain. Fraud is estimated to cost the insurance industry about 80 billion dollars annually, according to the Coalition Against Insurance Fraud (CAIF). Blockchain-powered solutions can help minimize this. Through the use of smart contracts, health insurance providers can effectively determine if a claim is false or not. “Insurers face intensifying pressure to reduce administrative costs, an area where blockchain might make a big impact by modernizing fragmented legacy IT systems, improving efficiency, and bolstering competitiveness,” a Deloitte report says. Given the potential use cases of blockchain in health insurance, insurers have a lot to benefit. However, this gain is not limited to insurers alone, the entire healthcare industry will be given a huge boost with the integration of blockchain in healthcare services.
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