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Cryptocurrencies Sink: Who Doesn’t Want It To Succeed?

In 2009 a mysterious report published on the internet began to give shape to the dream of creating a digital currency to rise as a native alternative to the current financial system. Had been born Bitcoin. More than 13 years old, tired cryptocurrencies they are no longer something residual. with the pandemic reached its peak, with a growing popularity and social acceptance. However, in recent weeks the crypto market is plummeting, a collapse of the sector that has been compared to the fall of Lehman Brothers that in 2008 precipitated the global financial crisis. Thus, there are more and more voices against the adoption of these assets that warn of their risks, not only economic, but also social.

If the tech tycoon Elon MuskDirector of You’re there and on the way to be the close twitter ownerhas become one of the most favorable voices to the use of digital divisions like Bitcoin, its nemesis is undoubtedly the business tycoon Warren Buffet. One of the richest men in the world, this prolific 92-year-old investor has ruled out betting on these assets, since he considered that, unlike a farm or housing apartments, “nothing is produced or contributed.” “If you offer me all the Bitcoin in the world for 25 dollars, I would not accept it because what would I do with it? I would have to sell it again, ”he explained last April.

The original dream of cryptocurrencies is to be a alternative to traditional money, allowing payment between two parties without the need for intermediaries such as financial institutions, something possible (although not efficiently) thanks to Blockchain. There are those who see in that techno-libertarian promise the will to advance a political agenda that weakening the capacity of the State to control tax collection. charges. However, that goal is still utopian. “Cryptocurrencies are born as a counterpoint to the power of central banks (…) but the sector knows that they will not be used until they are regulated,” says doctor in telecommunications José Luís Muñoz, director of the master’s degree in Blockchain at the Polytechnic University of Catalonia (UPC). Difficulty using them as a payment method now that we know the main use is as investment assets to make money and speculate.

volatility and risk

One of the reasons for the rejection of cryptocurrencies is their volatility. The value of money – be it physical or digital – was based on a social consensus. When we exchange a one-euro coin for a loaf of bread, what gives the coin its value is not its stamped metallic sign of European iconography, but the trust of users in it. And that trust is based on the support of governments, monetary authorities and investors. That of cryptocurrencies is blind faith without a network to stop the blows.

In addition to the growing hype and expectation that they aroused, the value of cryptocurrencies originally emanated from two promises: its scarcity –Bitcoin is limited to 21 million units– and its decentralized system. Already in 2013, the Nobel Prize in Economics Paul Krugman showed his skepticism: “The money must be both a medium of exchange and a reasonably stable store of value. And it remains unclear why Bitcoin should be.” After reaching its all-time high in November, its value has plummeted more than 50% since then. With more than 10,120 activities in circulation, the cryptocurrency market will be in full flow.

Scams and tax avoidance

This decentralized system means that cryptocurrencies operate in an environment devoid of laws, central banks, and tax authorities. A wild west where the rush for gold is digital. It is in this environment that all kinds of thefts and scams have proliferated. Bone with cryptocurrency crimes disappears 79% last year to move more than 14,000 million dollars, a parallel increase has been growing in adoption. Without any regulation, the victims of these frauds are totally unprotected. “Vulnerable families will pay the price”, Krugman pointed out. The executive director of the financial giant JP Morgan Chase, Jamie Dimon, has said that they are a “fraud”, that they are “worthless” and has compared them to a bubble that sooner or later “will burst”.

Others have pointed out that, without any supervision, cryptocurrencies attract criminal groups because they facilitate anonymity and practices such as money laundering and tax avoidance. That is what has made governments like China, Turkey or Colombia have banned its use. Other countries, like USA or members of the EUThey have chosen to promote this technology by protecting it under a regulatory umbrella.

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