Cryptocurrencies are here to stay

Select Magazine | December, 2017

What is happening today and what can be expected from their future behavior?

Background

Much is said about cryptocurrencies but it would probably be surprising to know that Bitcoin, Ethereum, Ripple or Litecoin are just some of the more than 800 cryptocurrencies currently circulating around the world. Within the multiple existing definitions we would like to keep the concept that a cryptocurrency is the digital representation of a value that is freely transferable in a secure manner, without the need for a centralized third party, such as a Bank, to certify it, but yes, with the presence of a network called Blockchain where the record of all transactions remains. Thanks to complex cryptographic systems it is possible to make sure that the currency is safe before attacks, falsification or duplication. In what particularly Bitcoin refers to, this coin - was devised by Satoshi Nakamoto at the beginning of 2009, placing itself as the most popular of all and gaining more and more followers with its price clearly upwards today, although many people still think it as a very volatile and risky instrument due to its lack of regulation. Despite this, Ehtereum is gaining ground over Bitcoin given its more advanced technology, added to its system of intelligent contracts and its speed in transactions. While Bolivia is the only Latin American country where Bitcoin has been declared illegal, Venezuela, on the other hand, is the country with the highest number of transactions in the region.

How to operate with cryptocurrencies?

All the operations that are carried out in the network are grouped in blocks and the famous "miners" are those who integrate the nodes of the Blockchain and try to solve the complex cryptographic puzzles that allow them to obtain a bitcoin. As regards the exchange markets, each user has a cryptographic key and in what is called the P2P system (peer to peer), the number of bitcoins increases and decreases to those who intervene in the transaction. There are also numerous trading platforms that allow operating with various cryptocurrencies.

Problems to be solved

A problem from the point of view of the central banks, issuers of physical money, is the loss of control and the supervision capacity of the payment system. Likewise, the tax authorities seek to tax these cryptocurrencies but there are basic questions such as their spatial aspect, among others, to know the jurisdiction where taxation would be subject. Also accounting aspects regarding its registration have not been specifically lauded or collected by any international standard so far and the argument of the risks of money laundering and financing of terrorism (LA / FT), given the anonymity and the difficulty in traceability of transactions.

 

Conclusions

It is real that the schemes used by cryptocurrencies have potential advantages in relation to lower costs of ownership and transfer of what other means of payment may be. However, the limited acceptance to date, its volatility in the price and the high risks for the participants, coupled with the fact that the issue is made by private agents anonymously, means that the cryptocurrencies have barriers that limit them as an accepted means of payment, remaining with little relevance to the transactional volumes of traditional payment systems such as credit cards and against currencies of legal tender, such as the dollar. In spite of this, cryptocurrencies are gaining positioning and it is a reality that they are here to stay.

For further information contact Bernardo Vitale through the e-mail [email protected]

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Authors

Bernardo Vitale
RAS & Consulting Services Junior Partner