What Are Cryptocurrencies, And Why Do They Pose A Significant Danger: What are Cryptocurrencies? How are they used? Behind this ambitious and futuristic means of payment lies a world where transactions are no longer carried out with banknotes and where breaking the piggy bank to count your savings seems like a thing of the past. Cryptocurrencies, as these virtual currencies are called, have carved a niche for themselves in society, and today, few have not heard of them.
The best known are bitcoins, a virtual currency born in 2009 and paved the way for many others that arose later. However, despite the success of these intangible currencies, some glimpse a particular danger in them. This is the case of Christine Lagarde, director of the International Monetary Fund (IMF), who, in an article published in the World Economic Forum, established the risks of currencies of this type.
“Normally, these digital offers are created decentralized without the need for a central bank. This gives active crypto transactions a halo of anonymity similar to cash transactions,” ” says the economist in her text, identifying it as a potential danger for money laundering and criminal financing activities such as terrorism.
Crypto asset transactions have a halo of anonymity, posing a potential danger for money laundering and criminal financing activities such as terrorism.
But the threats do not stop there. financial stability could also be compromised by the rapid growth of cryptocurrencies: the ”roller-coaster” to which their exchange prices are subjected, and their “ill-defined connections with the traditional financial world could easily create new vulnerabilities.”
Given this situation, it would be urgent to develop regulatory frameworks capable of facing the new challenge and organizations such as the International Monetary Fund, the Financial Stability Board (FSB), or the Financial Action Task Force (FATF- FATF).
The ”Fear” Of Cryptocurrencies In Governments
Lagarde is not the only politician who has glimpsed risks in cryptocurrencies. At the beginning of the year, the United States Government prohibited transactions with ”Petros,” the name given to the virtual currency issued by Venezuela. Venezuelan President Nicolás Maduro announced the issuance of 100 million of these Petros, whose unit was equivalent to the value of a barrel of oil in the country.
In response to this, Donald Trump vetoed transactions with Petros to counteract what he considered an action by Maduro to circumvent the sanctions imposed on his country. The US leader thus added one more measure against the Venezuelan regime, whose list already included the ban on both citizens and financial entities of the United States from buying the debt or other assets of the Venezuelan State or its national oil company -PDVSA-, the primary national credit source.
In Africa, the magnifying glass is also on cryptocurrencies. The large economies of this continent, such as South Africa or Zimbabwe, do not have any control over virtual currencies, which, as the IMF Director announced in her article, poses a significant risk of black money laundering or terrorist financing. And other crimes.
In Asia, the country where the most transactions are made with cryptocurrencies is Japan, with China on the other side of the scale. In the Asian giant, digital asset exchanges and ICOs – an acronym for Initial Coin Offering, an instrument to finance the development of new crypto asset protocols – have been prohibited. Online access to foreign trading platforms has also been blocked.
The Advantages Of Virtual Currencies
Even though cryptocurrencies are viewed with some suspicion due to the risks they can entail, it is also true that, along with them, there are associated benefits. As mentioned earlier, Lagarde herself reported in the text that virtual currencies could “boost financial inclusion by providing new and low-cost payment methods to those without bank accounts and empowering millions of people in low-income countries.” income.”
Along with this advantage of cryptocurrencies, others arise, such as the instantaneity of transactions, the drive for technological innovation, and the ease of carrying out international operations.