Cryptocurrencies reached their highest values in 2017 but plummeted the next year. Bitcoin and others fell by around 70 percent in 2018, triggering warnings from regulators across the world concerned about consumer protection, financial stability and illegal use. However, the future for cryptocurrencies look strong as traditional banks, and some central banks have been investigating how to incorporate them within the traditional banking system.
Policymakers have been an investigation if it is possible for cryptocurrencies to come under existing financial rules, and whether new regulations need to be drawn up. Regulatory approaches have varied significantly, with China banning cryptocurrency trading whilst at the other end of the scale Japan has found a system of licencing crypto exchanges.
The UK is discussing new rules while watching global trends, according to the executive director of strategy and competition at the UK Financial Conduct Authority (FCA), Christopher Woolard since London is a financial hub which has attracted major crypto firms. Crypto assets include “security tokens”, which are like shares or debt and “utility tokens” that allow access to products or services. Industry body CryptoUK is pushing for a balance between consumer protection role and a framework that supports the sector to expand and attract investment. A consultation paper is due in early 2019.
Many countries have already acknowledged Bitcoin as a legal tender, and now some have launched or are exploring the possibilities of launching national cryptocurrencies, including Japan, Palestine, Russia, Estonia and Sweden, which could build momentum. Japan has the backing of its central bank and financial regulators for a national cryptocurrency to be issued in mid-2020.
HSBC, Barclays, UBS and Santander are currently developing a Universal Settlement Coin in a bid to make trade more efficient. A single global, decentralised digital currency would be approved by those who wish to retain some of the freedoms of the original cryptocurrencies.
In the UK, Wirex, formally known as E-Coin provides a Visa card that converts digital currencies, through blockchain technology, that can be spent like traditional money and can be used at any Visa accepted outlets that accept the British Pound, the Euro and the US Dollar as well as Bitcoin, Litecoin, Ethereum, WAVES and XRP. Wirex services are already available in about 130 countries with a plan to expand in the United States in 2019. It is expected that in the future, more credit cards will be issued for encrypted currencies as the market increases.
Businesses have become excited about the blockchain technology behind encrypted currencies which can be used as a way to securely and swiftly handle payments or transfer information.
Stephen Innes, head of trading for the Asia Pacific at the currency trading firm Oanda, is moderately optimistic that bitcoin could reach around £3,900 in 2019, though others suggest it may become relatively obscure. China’s decision to ban ICOs and shut down Bitcoin exchanges has been considered by some as the beginning of the end for the current decentralised, unregulated market.
