Every financial instrument or institution has its ups and downs. We can apply this theory to the newest participants in the financial market as well –
Every financial instrument or institution has its ups and downs. We can apply this theory to the newest participants in the financial market as well – the digital currencies (bitcoin, dash, onecoin, zcash). It seems that 2016 promises an optimistic future for digital currencies like Bitcoin. Since April 2016 Bitstamp (a bitcoin exchange based in Luxembourg) has owned a license for Bitcoin exchange in the EU.
Another success was achieved in Japan, where the cabinet integrated the cryptocurrency into its legal banking system under the condition they will apply certain regulations linked to misappropriation and consumer protection.
By its nature, Bitcoin allows peer-to-peer money transactions eliminating the financial institution. But every innovation needs time to be accepted. Lots of hypotheses about cryptocurrencies’ credibility, security and stability were exposed. Warnings, instructions, and advice about using cryptocurrencies were also published on the Internet by official financial institutions. These reactions were expected. The cryptocurrencies are something new and still unfamiliar, though, and people and institutions do not know how to use them or what to expect. That is why the legality of a cryptocurrency depends on regulations of each country – some of them have already accepted it, others do not recognize it. There are some more extreme cases when cryptocurrencies were even banned.
However, cryptocurrencies have experienced hard times, although they are quite young. In the specific case of Bitcoin we can talk about a temporary reputation crisis, caused by individual loss of Bitcoins and inability of compensations, because of lack of legal means for it. Nevertheless, Japan rejected such kind of claims, because the digital currency was “not subject to ownership”.
A huge negative impact on Bitcoin’s reputation was exerted by the crisis of Mt.Gox (a Tokyo-based exchange that handled 70% of all bitcoin transactions by then). It was suspected that the missing 850 000 bitcoins had been stolen out of the MtGox wallet.
But there is always light at the end of the tunnel…
The new exchange of Bitcoin, Coincheck, has attracted more than 1000 merchants and billions of Yen in investment. Its acceptance in Japan’s banking system will contribute to building stronger credibility and confidence from users.