Cryptocurrency: Central Bank Digital Currency, a better alternative – Expert

An Economist and Financial Analyst, Tope Fasua said that with cryptocurrency becoming more widely accepted and with the search by investors for alternative places to put their money, Central Banks across the globe are under pressure to issue sovereign digital currency which indeed will be a more viable option.

Fasua made this known on Tuesday at the February edition of the Finance Correspondents Association of Nigeria (FICAN) monthly forum in Lagos.

He added that issuing the Central Bank Digital Currency (CBDCs) is the only option to help bankers remain relevant as a cryptocurrency takeoff will replace traditional currencies used in the banking system.

According to him, five (5) countries namely China, Ecuador, Senegal, Tunisia and Singapore have issued their digital currencies, not a cryptocurrency.

Speaking on the topic: “Ban on Cryptocurrency-related accounts in Nigeria and concerns of global central banking.”

Fasua said because of some concerns associated with cryptocurrency, such as the possibility of insider trading, lack of regulation, volatility in price, that is, uncertainty about what drives the rise or fall of the cryptos as well as relative anonymity somewhat becoming a safe haven for criminality, CBDCs are a better alternative to Cryptocurrency.

He said quite a number of bankers have invested in cryptos just to hedge their bet. But the traditional financial system is deeply rooted, organized and backed by the government, unlike the Cryptocurrency mining space.

 “If it started as a rebellion (which is the case), then you must think of the incentive for the global economy to sign on to that rebellion with you against the devil they know. This then means that until there is the global acceptance of the currencies, it will continue to be easy to create panic in the crypto world and big players can dump the currency when they have achieved gains.

“It then becomes worse than the stock market because, for cryptocurrencies, the fundamentals are non-existent apart from an analysis of how many are adopting the currency and who is winning between an established traditional banking system and the new kids on the block.”

According to him, Cryptocurrency is heading to a global single currency but one major challenge is that there are a lot of losses in it and that when most coiners die, no one is able to access their investments which ab initio are encrypted with passwords, passphrases and whatnot.

“People don’t usually plan to die. Now, this is where regulation helps in the financial markets. Apart from deposit insurance, which kicks in, in the event of the collapse of an insured and regulated financial institution, the relations of a dead account holder in a traditional bank could still have access to their balances,” Fasua stated.

Giving an instance, Fasua explained that bitcoin agreed that they will mine only about 21 million coins already, about 19 million coins have been mined.

However, all of a sudden, about 4.5 million coins are lost, translating to about 238 billion worth of coins that are lost.

Another challenge cryptocurrency is facing, which has given the traditional banking system an edge is the level of global acceptability of virtual money. This is considering a number of factors including financial inclusion which affects the everyday needs of the common man and his level of knowledge in technology.

The questions they will need answers to will be; How will a local farmer or the market trader benefit from Cryptocurrency? What kind of business do they need to transact that cannot be done with the fiat currency that requires spending so much to buy crypto coins in order to complete that transaction?

This is coming at a time when Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), has honoured the invitation of the Senate over the ban placed on cryptocurrency-related accounts in the country.

Emefiele arrived at the National Assembly (NASS) on Tuesday to honour the request by the Senate Joint Committee on Banking Insurance and other financial institutions.

Suzan O