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All about Entrepreneurship

It was only until I got to college when I first discovered the faster and more permanent internet connections that were available to us in our dormitories. Not long after this I got exposed to peer to peer file sharing on a music piracy network called Napster and I was unable to believe such a platform could ever exist. It was at this point where I realised that things were clearly changing at a much more rapid pace than I could keep up with and to try and predict where these changes would lead would be an immensely lofty task. Fast forward to 2017 and indeed the changes to my day to day routine have been affected immensely by developments in technology. With a few taps on my phone, I can book a taxi or a flight, order food, and video chat with someone thousands of miles away. If any of these services were taken away from me, it would be very difficult for me to re-adapt to the old ways. It seems that almost everyday there is a new innovational service being invented that makes our lives more convenient and the wave of these changes is only gaining momentum. As we speak, even powerful institutions that are hundreds of years old are gradually being undermined by technological innovation. Financial arms of governments (ie central banks) as well as other financial institutions may not be spared by a recent development known as cryptocurrency the most well known of which is BitCoin. What is cryptocurrency? In short, cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of further currency units as well as verifying the transfer of funds in those units. The key point about cryptocurrency is that it exists completely in cyberspace and is not regulated by any central bank like the conventional fiat currency that we have been using all of our lives. It is exceedingly difficult to regulate cryptocurrency as it is accepted by a growing number of online outlets and individuals all over the world. It is also currently almost impossible to trace the origins of transactions of cryptocurrency allowing the people to shop anonymously. The usage of cryptocurrency has increased vastly over the last several years and this has been witnessed all over the world in both developing and developed countries. More and more online businesses and physical shops are beginning to accept cryptocurrency such as Bitcoin and even individuals are able to use this kind of currency between themselves. Cryptocurrency has grown to such an extent that it is getting noticed by Central Banks and other large financial institutions and rightfully so. Should cryptocurrency continue its current growth trajectory, we may begin to question why we even need conventional banks in the first place. If I primarily use cryptocurrency in my day to day activities, will I need to have a checking account in a bank? What will happen to regular money that we have been so accustomed to using if people make this switch? One may also ask how such a currency would be regulated seeing that it exists across borders. These questions have many governments and banks worried and as such they take a negative few on this new currency innovation.

control the value of its currency and can devalue it in order to boost exports and therefore create jobs during a slower economic period. The value of a currency can also be manipulated by a government in order to ensure the ongoing competitiveness of their exports. Governments can also print or destroy the currency in circulation in order to mitigate inflationary pressures. Cryptocurrency theoretically can erode this government control of currency which can reduce its effectiveness in determining monetary policy. Central banks have the most to lose. They are the ones who, usually independently of the government, control the money supply and if individuals switch in large enough numbers to cryptocurrency, what currency will be left for them to control? Many fans of cryptocurrency have argued that central banks have historically been very irresponsible when it comes managing a nation’s currency reserves. For example the US dollar has lost a significant amount of value since it was taken off the gold standard in the 1970s. More recently the Federal Reserve and European Central Bank have printed trillions of dollars worth of money in order to assist larger financial institutions to recover from the Financial Crisis of 2008. Printing such vast amounts of money could have severe impacts on inflation in the coming years. This point, they argue, is a good reason why people should use more cryptocurrency as the creation of additional cryptocurrency units follows a set algorithm and therefore controlling its supply. Banks also point out that as cryptocurrency is currently unregulated, it can be used for the financing of criminal activities and money laundering. This has been evidenced by the “Silk Road” an online store where the purchase of many illegal goods were made using Bitcoin. Silk Road has since been shut down by the US authorities. Fans of Bitcoin state that although cryptocurrency can be used in illicit trades, conventional banks have also been caught countless times laundering the ill gotten gains of criminals. An example of this was when HSBC was caught laundering billions of dollars worth of drug cartel money out of Mexico in 2012. This is an issue that will continue to be debated and what actions governments will take against cryptocurrency is yet to be seen. As of now it looks as if the use of cryptocurrency will continue to grow rapidly. So far it is still relatively in its infancy and faces much volatility but evidence has pointed to the fact that this is not a fad but instead a growing phenomenon. In such a short period of time we have seen such a large growth in the technology that drives our everyday lives. This is to the point where even currency as we have known it for thousands of years may also become a relic of the past. It has been 18 years since I graduated from high school. I have saved space in my trouser pocket as I no longer have to carry a separate device to play my music. In the near future I may be able to save even more pocket space as carrying a wallet my not be necessary either.

Governments and banks prefer to retain control of a country’s currency. There are many good reasons for this. A government can

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Rowad Magazine Issue #17