Virtual Taka in Bangladesh context

https://dailyasianage.com/news/174223/virtual-taka-in-bangladesh-context EDEN BUILDING TO STOCK EXCHANGE Published: 12:28 AM, 21 April 2019

Virtual Taka in Bangladesh context M S Siddiqui

Currency is broadly defined as "tokens used as money in a country." It is a means of exchanging goods and services. The use of currency is intertwined with the history of money. Money derives its value by being a medium of exchange, a unit of measurement and a storehouse for wealth. It can be a shell, a metal coin, or a piece of paper with a historic image on it. The latest version of currency is losing the physical characteristics and became virtual currency.

The development of monies and a variety of payments systems throughout history have helped make exchange more efficient and secure. At present, technology base soft money and with rapid spread of Internet-based commerce and mobile technologyfacilitate the use of virtual currency (VC). Secure online payments systems such as PayPal and mobile payments and transfer solutions i. e. M-Pesa are changing the ways in which payments for goods and services are made.

There were existences of some form of currencies. VC is further advanced currency system from Digital gold currency (DGC). DGC is a form of electronic money or digital currency based on mass units of gold.

It is a kind of representative money, like a US paper gold certificate during the period from 1873 to 1933.

Those currencies were exchangeable for gold on demand.

There was another form of currency. The e-gold system was launched online in 1996 by a US Company and had grown to five million accounts by 2009. It used a central account structure to track and transfer certificates backed by gold in a central repository with no guaranteed security and accountability, mainly as a function of trust in those running the e-gold system.

Since e-gold was outside the financial regulatory system, it offered effective anonymity and security, guaranteed by trust in the operating practices of the companies running these systems. But the transactions were suspended due to legal issues. The DGC and e-gold are primary form of DCs. Virtual currency(VC) is a kind of electronic money. The transaction doesn't involve any physical transfer of coin or bill like taka. VC two two key elements: (i) the digital representation of value or "currency" that can be transferred electronically between parties; and (ii) the underlying payment and settlement mechanisms, including the specialized electronic ledger system.

VC can be obtained, stored, accessed, and transacted electronically, and can be used for a variety of purposes. It is used only between the transacting parties agree to use them. The agreement means acceptance and treat VCs like taka, dollars, euros, or other forms of money.

Till date, it has limited range of fields to exchange. It is mean to use a self-contained virtual environment.

The exchange of VC with fiat currency or other VCsor its use in payments for goods and services outside of the virtual domain is significantly restricted.

There are some convertible VCs for the exchange of the VC with fiat currency or other VCs. VCs are accepted for payments for goods and services in the real economy can only possible with further agreement and acceptability of VC and supported by technology.

Paper currencies are decreed by a central authority to be legal tender, have no intrinsic value, and are only convertible into a commodity such as gold at the discretion of a central authority. As a result, paper currencies' value depends on users' trust that the central authority will be able to maintain the currency's value. Paper currencies have key advantages over commodity-based currencies.

These currencies are highly dependent on their central authority to maintain their value. The stability of these currencies is dependent on governments' macroeconomic policies and can experience huge fluctuations, even becoming worthless at a crisis of excessive inflation.

Financial innovations have allowed people to conduct economic transactions far beyond the constraints imposed by physical currency. VCs are issued without the involvement or backing of a state. No one is required to accept them as payment or to exchange them for traditional currencies but accepted by the group of persons / company agreed upon to use the VCs. In other words, a virtual currency is one that is not administered or issued by a sovereign. The key difference between virtual currency and real currency is that virtual currency does not have legal tender status in any jurisdiction.

A VC is a digital representation of value that can be transferred, stored, or traded electronically and that is neither issued by a central bank or public authority, nor necessarily attached to a paper currency (taka, dollars, euros, etc.), but is accepted by people as a means of payment. Side by side, VCs have become increasingly common in recent years.

So far, no VCs are paper made currencies and no government has adopted a VC as its legal tender.

They do, however, represent value for a particular community that uses them as a means of exchange.

While VCs are issued as a currency for everyday transactions, requires considerably less new physical infrastructure than government-backed paper currencies in broad use today. VCs, however, also require a networked architecture capable of supporting such everyday transactions.

Some VC schemes make use of "distributed ledger" technologies that provide complete and secure transaction records without using a central registry. These technologies therefore allow for direct peer-topeer transactions and eliminate the need for central clearinghouses. The "blockchain" is the distributed ledger which work with computer networks of different unidentified and private computers around the world.

The user of VCs also store in "digital wallet," which are identified by your "public keys." The user enter into own digital wallet using own "private keys." These keys password are random sequences of 64 letters and numbers. User can enter into digital wallet maintained in blockchain and make transactions of VCs. In the longer term, these technologies have the potential to deepen financial inclusion by offering secure and lower-cost payments options. Apart from payment records, distributed ledger technologies have implications for a wide range of markets and financial market infrastructures as a fast, accurate and secure record keeping system, including for stock exchanges, central securities depositories, securities settlement systems or trade repositories. Technological and regulatory progress will be needed to realize these potential benefits.

As a result, the rapid deployment of a VC over a large geographic area may be considerably less complicated than deploying these more traditional currencies; the amount of labor, capital, and infrastructure required to deploy a VC has the potential to be dramatically less.

VCs offer many potential benefits, including greater speed and efficiency in making payments and transfers-particularly across borders--and ultimately promoting financial inclusion.

In the context of VCs, the technological sophistication required includes competencies in networking, computation, and cryptographic techniques. These have potential benefits but also involves various risks, including: operational risks since these are relatively unproven and may not perform as expected.

The virtual currency marketplace is comprised of many different platforms where you can convert one type of virtual currency into another or into real currency. Some virtual currency platforms may be missing critical system safeguards and customer protection related systems; without adequate safeguards, customers may lose some or all of their virtual assets. , The critical component of the entire system is the public ledger known as the blockchain.

It useto maintained by vast unidentified private computer networks spread all over the world and the subscribers also not known to them. It is possible that elements of these networks could abuse the by undoing transactions or manipulating the transactions etc.

Any unregulated transaction involving exchange in home and abroad are subject to regulation of AntiMoney laundering and Foreign Exchange laws. Many jurisdictions like Bangladesh have no such transactions without controlling and monitoring the transactions.

The development of effective regulatory responses to VCs is still at an early stage. These currencies are difficult to regulate as they cut across the responsibilities of different agencies at the national level, and operate on a global scale. Many are opaque and operate outside of the conventional financial system, making it difficult to monitor their operations.

Different International bodies are playing an important role in identifying and discussing the risks posed

by VCs and possible regulatory responses. Bangladesh may not the ready to accept such VCs due to inefficiencies of regulators and currency users. Let us wait and see.

The world is using virtual currencies and Bangladesh Foreign Exchanges are regulated by back dated "Foreign Exchange Regulation Act, 1947. Moreover the rule issued by Bangladesh Bank made the situation more conservative. Bangladesh should allow the transaction platform like PayPal without intervention for transaction of real currencies to facilitate international trade of goods and services. We have long way to go.

The writer is a legal economist Email: mssiddiqui2035@gmail.com