The integration of technology and currency is one of the most talked about financial innovations of the twenty-first century. Facebook has been in the news quite a bit recently as it unveiled a plan to release its own cryptocurrency, Libra. Many countries, like France and Germany, have not only objected to Facebook implementing its own cryptocurrency, but gone so far as to say it will be banned. For those of us that are still a little cloudy on what exactly cryptocurrency is, it’s a virtual currency that relies on block-chain technology to decentralize it and thus protect from hacks. Transactions with cryptocurrency don’t need a middle-man (like a bank) that fiat currency exchanges do. Every time you swipe your card to buy Howling Cow (which is way too often if you’re like me), that purchase has to go through your bank, where they keep a ledger detailing each one of your transactions. But for something like bitcoin, the ledger is stored across millions of computers worldwide in a public database. Additionally, the sender and receiver of each transaction remains completely anonymous. The value of crypto currency is entirely based on supply and demand.
So, why exactly are countries so weary of the future of cryptocurrency? Wouldn’t a universal, easily transferrable, non-hackable currency be a good thing? For starters, crypto can very effectively ruin a fiat currency’s sovereignty over its country. This can be a good thing and a bad thing. In developing countries with absurdly high inflation rates and extremely unstable currencies, crypto is a great medium to cut out corrupt governments and central banks. On the other hand, a currency from a social platform like Facebook with over two billion members could easily gain prominence in the global economy and render various fiat currencies worthless in comparison. This would cause quite a bit of economic turmoil. The anonymity of cryptocurrencies allows crime organizations, terrorist groups, and even sovereign countries to make transactions that they’d rather not want the world to know about. Another huge issue is how governments could effectively regulate it. While cryptocurrency is definitely here to stay, its future will be filled with trials and tribulations.