Central banks warn against crypto currencies

Mushfique Ahmed Chowdhury | Published: August 19, 2018 21:35:02 | Updated: August 20, 2018 22:09:33

United States billionaire Warren Buffet has described bitcoin as a "real bubble" and said it cannot be considered a value-producing asset. The origin of bitcoin is unclear. It is yet to be ascertained who actually founded it. A person who gave his identity as Satoshi Nakamoto is said to be the one who conceptualised an accounting system in the aftermath of the 2008 financial crisis across the world. Nakamoto published a white paper about a peer-to-peer electronic cash system that would 'allow online payments to be sent directly from one party to another without going through a financial institution.' The paper is available at https://bitcoin.org/bitcoin.pdf

Bangladesh Bank (BB), as central bank of the country, issued its first 'warning' against the use of bitcoin in 2014 and issued another 'cautionary notice' on its website on December 24, 2017. Both the warnings issued by the BB pointed to the violation of Foreign Exchange Regulation Act 1947, Anti-Terrorism Act 2009 and Money Laundering Prevention Act 2012. However, from the plain reading of the related provisions of the above regulations it is evident that the regulations have shortcomings in dealing with the much-talked-about issue of crypto currencies.

The definition of currency in Bangladesh Foreign Exchange Regulation Act has been defined in Section 2(b), but 'bitcoin' has not yet been included in the definition of currency. Therefore, the transaction of crypto currencies without authorisation does not fall within the ambit of Section 2(b). However, the definition of crypto currencies in the Anti-Terrorism Act and Money Laundering Prevention Act refers back to the definition of currency mentioned in Section 2(d) of the Foreign Exchange Regulation Act, which means none of the three regulations cover the definition of crypto currencies such as bitcoin, ethereum, ripple and litecoin.

The warnings of BB are based on the acts which are apparently not equipped enough to criminalise or ban crypto currencies. Although the authorities concerned favour stern action against the crypto currency traders and miners, a facebook page called 'Bitcoin Exchange: Bitcoin buy and sell Bangladesh' has been opened in the meantime, and localbitcoins.com says that these currencies are being traded in Bangladesh through specific banks, bKash, Rocket, and other platforms of mobile financial services (MFS).

Southeast Asia was the region most affected by the 1997 Asian financial crisis, and countries such as Indonesia, Singapore, Vietnam and Thailand issued strongest warnings about the potential downsides of crypto currencies. Moreover, crypto currencies are a dream for the cyber criminals. Hackers from across the world are targeting crypto currencies. The government of China, France and India have issued public advisories to warn against potential risks involved with regard to bitcoin. The US Federal Reserve on December 03, 2017 issued a warning mentioning that the digital currencies, specifically bitcoin, pose 'financial stability risks.'

Crypto currencies have captured within a short period of time the attention of financial speculators, con men, and hackers, but such currencies cannot be any real solution to the much-touted need for a transaction system suited to the internet age because of their inbuilt risks.

Mushfique Ahmed Chowdhury, a graduate from the Faculty of Law, University of Malaya, Kuala Lumpur, is working as a Legal Associate in Malaysia.



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