The recent 530 million cryptocurrency NEM hack at a Japanese exchange has prompted a re-evaluation of this promising blockchain technology’s risk profile. P2P settlement, which does not require a third party to authenticate the payment and promises to lower the time and fees involved in such settlements, contrasts the existing payment processing business that cryptocurrencies bring.
The digital Yuan system is ready to digitize China’s existing monetary base rather than develop a new currency such as Bitcoin but make no mistake. It has the potential to revolutionize China’s currency system.
This also ensures that all nodes in a network ecosystem are involved in every transaction, either directly or indirectly. This is in stark difference to the traditional settlement process. In which only the payer, payee, and a few third-party organizations participate in confirming the settlement. Though the actual data cannot be recovered from the hash value (using SHA256, for example). All participating nodes will know the transaction’s hash. Furthermore, rogue nodes are involved in these settlements. They will be vulnerable to insider hacking.
Another benefit of digital money is that it may be settled quickly utilizing peer-to-peer (P2P) technology.
- However, it is gone forever once the currency is out of your wallet. Because all transactions in a blockchain are permanent or unchangeable. There is no way to claim them back, as there is in traditional banking.
- This creates a unique threat in which simply mistyping a target wallet address can cost you millions of dollars (if you have it in your wallet).
- Furthermore, there is no third-party intermediary where checks can be made to avoid dirty money. Digital currencies have become the preferred avenue for drug dealers, terrorists, and money launderers.
These all constitute a severe danger to the digital coin company from a risk management standpoint.
- Rules must keep pace with the rapidly expanding technology and its growing popularity to address these issues.
- Simultaneously, because all transactions are recorded, it is theoretically possible to go back in time and monitor specific transactions. They must be used to investigate suspicious activities and prosecute the culprits.
- Today, various nations are drafting rules to address the hazards posed by crypto transactions, raising the prospect of widespread adoption among the general public shortly.
The Reputation of cryptocurrency
- Government rules are the final nail in the coffin for cryptocurrency. Many governments have imposed limitations on cryptocurrency ownership and trading due to a rash of heists and money laundering crimes. As well as the excessive volatility of cryptocurrencies.
- To prevent overheating and abuse, initial coin offerings are prohibited in large markets such as China and Russia, and trading restrictions in Japan and Korea are in place. These restrictions have resulted in a 50 percent drop in global trading activity.
- Furthermore, because Central Banks have been conducting monetary and fiscal policy using fiat money, adopting a global cryptocurrency is likely to face opposition from various Central Banks. Before cryptocurrencies are broadly adopted, new public policies and scalable features must be redesigned and implemented.
Regulation and Cryptocurrency
- The regulators are primarily responsible for the resurgence of cryptocurrency. The viability of cryptocurrency as an investment will be determined. Mainly by the market’s consolidation into a few available crypto coins, with trading taking place on major and regulated exchanges.
- Substituting fiat money with a national or global cryptocurrency necessitates a thorough examination of the social, political, and economic issues at play. While the entry of regulators may appear to go against the grain of disintermediation. It may be the first step toward restoring public trust and confidence.
The wrapping up
On the other hand, policymakers’ quest for greater capital convertibility can be more easily realized with the help of bitcoin. However, the benefits of crypto convertibility will only be realized. If its operation is regulated rather than being at the mercy of a decentralized speculative asset. At least until the economy adjusts to the new regime. In this regard, RBI planned to create its cryptocurrency. Which it believes will be a tremendous driver towards broader financial inclusion. Stay up with the expanding technology and harness the growing consumer base of cryptocurrency. Yuan Pay Group is considered a centralized, government-accepted distributor of the China coin. This ensures that the investors can purchase and sell cryptos in China.