Regulators and governments are devising methods to bring the cryptocurrency under some form of regulation.
Blockchain technology and associated cryptocurrency have come to stay. Bitcoin could be the first cryptocurrency. However digital currency concept based on distributed ledgers technology is quite old. In 1983, American Cryptographer David Chaum invented the blinding formula, an extension of the RSA algorithm which is still used today for web encryption. Chaum went on to create DigiCash in 1989.
The Advent Of Distributed Ledger Technology
The distributed ledger technology and cryptocurrency came into existence after the financial crisis of 2008. The financial crisis of 2008 led to a deficit in trust in the banking system, erosion of faith in the honesty of public institutions, and losing the value of the fiat currency. In such a scenario the birth of Bitcoin took place. In the aftermath of the financial crisis of 2008 gold along with other precious metals and stores of value rose in price. Bitcoin, it’s a finite supply, decentralized structure and anonymity caught the fancy of a new generation of investors.
Pros And Cons Of Crypto Assets – CBDC
Bitcoin is a decentralized finance entity and its anonymity led to Bitcoin and other crypto-assets being used by criminals and even drug dealers to siphon off their ill-gotten gains without coming under the notice of authorities. The latest instance is the hack of the Colonial Pipelines network in North America which crippled operations of the oil company. The company had to pay more than cryptocurrency worth $6.2 million as ransomware. When cryptocurrency was launched many experts predicted that the authorities would ban it in a short period of time. However, its decentralized structure, global reach of the internet led the authorities to choose not to act in haste. Instead, they observed and learned.
Today regulators and governments are devising methods to bring the cryptocurrency under some form of regulation. At the same time, many Central Banks are starting pilot projects and are preparing to launch their own digital currency which has been labelled as CBDC or Central bank digital cryptocurrency.
China is far ahead in the digital currency race and has already launched its Digital Yuan. Moneycontrol reports that the Chinese government has already started its pilot program for an official digital version of its currency—with the likelihood of a bigger test at the Beijing Winter Olympics in 2022. Many feel that if successful it will augment the governments’ control over the country’s financial system and could one day topple the U.S. Dollar as a preferred world currency.