Here you would point out, isn’t it risky to invest in cryptocurrency? Frankly, every investment comes with its own pros and cons and calculated risk. What we can do to minimize risk is to get informed.
Tokenized crypto is essentially issued to raise funds or crowdfunding, so investing in them is akin to buying IPOs in stock markets. The funds raised are later utilized in various kinds of business. But, of course, as demand and innovation go, some businesses do lose and some businesses make a profit, so you want to assess how the cryptocurrency issuer minimizes the risk and what kind of ecosystem has been created behind the currency.
A lesser-known fact is that an ecosystem is significant for every currency, be it fiat currency or cryptocurrency. The merchant’s acceptance is vital to create a genuine ecosystem and a pool of people using the preferred Cryptocurrencies. There are many crypto exchanges in the digital world handling these cryptocurrencies.
Even with all said and done, the legal aspect of crypto still keeps us on the fence. It’s important to remember that fiat currencies are issued by sovereign governments. They have also signified the currencies of the future in the form of medium terms notes (MTNs), so there is no way that a state or central government would easily accept cryptocurrency as a legal tender. It is also harder to impose taxation on cryptocurrencies, and the ecosystem for fiat currency is stronger than that of newly minted cryptocurrency.
The reason why cryptocurrency faces such resistance from administrative and central banking forces is rooted in its decentralization. If my choice of cryptocurrency is accepted by any individual merchant, then approval of a governing body ceases to be relevant as it is private affair, but governments which we elect to run our nations find it exceedingly difficult to tax the Cryptocurrencies users on these transactions, which hurts the country’s ecosystem.
As for my individual opinion, cryptocurrency should be accepted as a parallel or alternate currency. To increase its legitimacy and acceptance, the governments can impose a system of income tax or sales tax on it, similar to that on fiat currency transactions, a model of which was recently seen in India’s budget, though the 30% tax on each transaction wasn’t clearly explained – would it be on total amount or on the capital gain? With changing trends and a growing cry for autonomy and decentralization, it is in the best interest of governments to catch up with the mindset of their populace and embrace digital currency as the next step in the financial revolution which is accordance with the Industry 4.0 Revolution where IoT and Fintech combine to create stronger economic growth.
Dato Sheikh Jamal can be reached at https://www.linkedin.com/in/dsj