Cryptocurrencies are digital or virtual currencies that rely on cryptography technologies to function and employ encryption to safeguard transactions. They enable safe online payments without the involvement of third-party middlemen. Bitcoin was the first of its kind, and remains the most well-known till date.
The emergence of cryptocurrency has created a new financial structure in the world. Countries embracing crypto have had a massive impact on their citizen's livelihood. The global market of crypto is worth more than $2 trillion and it is expected to reach more than $5 trillion in the next two to three years (CoinMarketCap, 2022).
Some policymakers and economists view cryptocurrencies as a means of improving financial inclusion for the underbanked and underserved populations.
The way Western countries have adapted to crypto in just eight years reflects how interested people are in crypto.
The United States, the United Kingdom and Australia are the three top countries that have adapted to crypto. Countries like India and Pakistan are also in the race of the fastest growing crypto nations.
Despite such expansion and recognition across the world, Bangladesh is yet to accept it, and crypto is still illegal here. There are two main reasons behind the government's decision to not legalise cryptocurrency.
First is the volatility of crypto's value and the lack of anonymity connected with it. The unpredictable nature of crypto has already affected tonnes of people's financial positions, and the government is afraid that it might create a really bad impact on the Bangladesh economy.
With a hostile view toward crypto, the government has made crypto illegal according to the Foreign Exchange Regulation Act. The act also states that anyone associated with crypto in Bangladesh will face serious consequences under the Foreign Exchange Regulation Act, 1947; Anti-Terrorism Act, 2009; and the Money Laundering Prevention Act, 2012 (Bangladesh Bank, 2017).
Nonetheless, the people of Bangladesh have also shown their fair share of interest in cryptocurrency. Additionally, increasing business competition based on blockchain shows how much the next generation is interested to be a part of the crypto world.
As most countries are adapting to NFTs (Non-fungible tokens) and DeFi (Decentralised Finance), the government is now considering the future prospects of crypto in Bangladesh (Gailey, 2022).
The route to legalising crypto
With crypto's growing trajectory and global adoption, there may come a time when the government has no other option than to legalise crypto in Bangladesh. The government needs to be prepared with effective policies to ensure that it doesn't hamper the economy of the nation and not hinder citizens with ineffective financial laws.
Firstly, the government should set a minimum financial balance requirement for the people who want to invest in crypto. By doing this, people who are eligible to invest in crypto will be able to afford the loss if anything goes south. For example, only people having a net worth of Tk5 million could become eligible to invest in crypto.
Secondly, people who want to invest in crypto should be allowed to invest only a particular percentage of their net worth in crypto. By doing this, the volatile nature of crypto won't affect them too badly. For example, a person could be allowed to only invest 25% of his or her net worth in crypto.
Finally, the government could set a requirement for all the crypto deals to receive authorisation from the government. The government could directly monitor all the transactions related to crypto to ensure that there is no illegal use.
In the era of NFTs and blockchain, crypto can usher in massive changes to the financial sector of Bangladesh. But first, effective laws and enforcement need to be ensured.
How it actually works
Much of the interest in cryptocurrencies is speculative, with speculators driving prices high at times.
Cryptocurrency can be used to buy everyday products and services, but most individuals invest in cryptocurrencies the same way they would in stocks or precious metals.
While cryptocurrency is a novel and exciting asset class, purchasing it can be risky. Therefore, it is necessary to undertake a fair amount of research to fully understand how each system works.
Cryptocurrencies can be purchased using cryptocurrency exchanges like Coinbase, Kraken or Gemini. These allow you to trade some of the most prominent cryptocurrencies, including Bitcoin, Ethereum, Ripple, Litecoin and Dogecoin.
Crypto investments are available on several brokerage platforms, including Robinhood, Webull and eToro. Additionally, there are crypto exchanges, such as USD Coin, a crypto stablecoin, to purchase Ethereum on Coinbase Exchange.
Investments in cryptocurrencies can be profitable. Over the past 10 years, the value of cryptocurrency markets has surged, reaching approximately $2 trillion at one time. Bitcoin had a market value of more than $550 billion as of May 2022. (CoinMarketCap. "Bitcoin Price)
One of the most well-known applications for cryptocurrencies is the remittance industry. Cryptocurrencies like Bitcoin are now used as intermediary currency to speed up cross-border money transactions. Fiat money is exchanged for Bitcoin (or another cryptocurrency), sent across international boundaries, and then exchanged back for the destination fiat currency. The procedure of sending money is thus simplified and made more affordable using this technique.
Sayma Akhter Jafrin is a graduate of Economics and Finance from Asian University for Women and also a Research Associate for Business and Economics at Youth Policy Forum.
Azmain Bin Rashid is pursuing his degree at Army-IBA and is also a research associate for the business team of Youth Policy Forum.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.