What are cryptocurrencies? Today, more than ten years after their appearance, we still cannot give a straight answer to this question. And the possible answers vary from the future of finances to the next bubble. Subject to huge fluctuations and increased regulations by governments around the world, they continue to be favoured by IT specialists, startups and cyber fans, but also by some serious business people. And while all eyes in recent months have turned to the Libra project, with which Facebook plans to enter this market, another more significant trend is about to influence the future development of the industry – state-owned cryptocurrencies.
Cryptocurrencies have developed as an alternative to centralized state financial systems, and initially governments were naturally placed among their opponents. Many of them have lived up to these expectations by imposing a number of constraints on the sector. However, unexpectedly for many, some decided to adopt a different approach and created their own state-owned cryptocurrencies. Who are they and what can they expect from this marriage to the bad kid of finance? Here are some of the most curious projects in this area.
You might have expected that an innovative country, such as South Korea, Japan, Estonia or the United States, would be a pioneer in this sector. Nothing of the kind. The first country to put its digital currency into circulation with public money was Ecuador. The small South American economy created its Sistema de Dinero Electrónico at the very end of 2014, and, according to government sources, aims to supplement the national financial system rather than to replace it. It can be used for payments between individuals and legal entities, as well as for paying taxis and other services.
Venezuela’s President Nicolás Maduro, defined by many as a usurper of power and even a dictator, is probably not the first one who comes to mind when you think of innovations introduced by a state. However, that is what he did in 2018, when he announced the state-owned cryptocurrency Petro, which he said would help the monetary sovereignty of the socialist country. Its advantage it that it is secured by state reserves of oil and minerals. Through this innovative approach, the Venezuelan authorities aim to help the country’s collapsing financial system, circumventing US sanctions and gaining new opportunities for access to international funding. The success of the project, however, is at stake now, especially since it has received criticism from the opposition in the country, as well as from a number of international experts.
The biggest player
with state-created cryptocurrencies, however, may soon turn to be China. It is possible that the country will soon release its digital coin, taking advantage of blockchain technology, but retaining control. The first issues are expected to be allocated to the technological behemoths Alibaba and Tencent, the fintech platform Union Pay, as well as several Chinese banks.
This would give the All under Heaven Empire new opportunities to influence markets and would add another aspect to the trade war with the US, giving Beijing more independence. However, the pros do not end here. China will give the world another proof that it is turning into a technology leader, this time in the blockchain sector. In addition, the Communist Party will receive
a powerful new instrument for tracking
the way in which the citizens of the country make payments with all the consequences of this – combating money laundering, corruption and crime, but also the opponents of the regime.
India, Estonia and even the Marshall Islands also have plans for government-supported cryptocurrencies. Some of the countries in this list aim to modernize their financial systems and stimulate technological entrepreneurship, others to increase their financial independence and limit external influence.
Regardless of whether we talk about dictatorships or some of the most exemplary democracies, such a move could make the basic idea of cryptocurrencies meaningless, depriving them of their greatest value – decentralization. An aspect that is at the heart of the creation of such payment instruments. That is why it will probably take many years before the state-supported cryptocurrencies prove their vitality and receive wider support from the technology industry.
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