Cryptocurrencies & Law in the Tide of Deglobalization

The idea of a global world is somewhere being invaded. From Trump’s “Make America Great Again” to Modi’s “Make in India”, the world leaders are hinting the dawn of deglobalisation. Millennials are contributing to a new space of innovation which is driven by such economic units that synergise a global yet de-global ecosystem.

Ushered indirectly through Brexit, US Presidential Elections 2017, and an unprecedented crumble of China’s bubble economy, the underestimated perils of deglobalisation may soon lead the world to establish a new regime for the global trade currency. The need for standardisation in commercial trade transfigures a more stable and independent global currency.

The existing international monetary system is decorated with inherent weaknesses. The Euro, the Yen and the US Dollar are the most accepted currencies for international transactions. The US Dollar, tyrannically, makes up for 64% of all known foreign exchange reserves- making it a de facto global currency, without holding an official title for more than 70 years. This has been widely challenged and the internet could have a possible solution for it!

Initially, the Internet was only known for information but gradually it flooded with disrupting technologies that accorded value to the web. An ingenious mix of cryptography and mathematics led to the invention of cryptocurrencies. Cryptocurrencies exist virtually and are devoid of any governmental control of a particular nation. These are only represented through a series of transactions recorded in a ledger shared among the traders of cryptocurrency. The ledger is known as “blockchain”.

Could cryptocurrency be the next global trade unit?

Blockchains are created and controlled by traders, who are buying and selling cryptocurrencies over the internet. Its price is determined by the simple rule of supply and demand. Hence, it is controlled and managed by the traders.

Blockchains are created through timestamps. Within minutes, all transactions are verified, cleared and recorded in a block that is linked to the preceding block, thereby creating a valid chain. This chain-structure permanently stores exchanges of value and prevents anyone from altering the ledger without modifying the centre chain. Thus rendering blockchains safe from theft.

The internet is gradually pushing us to challenge how we have structured society, defined value and rewarded participation. A true paradigm shift ushered in by decentralised ledger technologies. The safety and stability of blockchains still cannot be termed foolproof since the risks associated with the cyber world are also unforeseeable.

Cryptocurrencies have the potential to overcome growth rate problems that have long been at the heart of monetary policy, by having clearly defined escape clauses. Currently, however, the issuing bodies of most cryptocurrencies do not make use of this possibility. Like traditional policymakers, they allow discretionary interference by their respective 'monetary policy committees' instead.

A cashless global economy may be a far-fetched idea that can become a reality through revamped societal acceptance of modern norms. Compliances and reinforcement of individual economic units can help in actualizing the idea. Economic flow is now creating strategic business units that are comprehensively based on product, price and quality; giving shape to the moulds of de-globalised yet global economic structures.

Is cryptocurrency legal?

The majority of the governments have held an unclear stance over the legality of cryptocurrencies. While a small portion has either completely legalised it, the other has conversely banned the use of blockchains within their territory. Major economies have at most issued official warnings stating cryptocurrencies as “unrecognised” by the law and thereby, they are accorded no value in transactions. However, this position is contradicted by the ever-increasing value of cryptocurrencies. Currently, the amount of 1 bitcoin equals to ₹1,80,000!

Cryptocurrencies are somewhat similar to US dollars. The basic demand for cryptocurrencies arises from the sheer loss of trust in the domestic governance or a desire among individuals to hide their identities.

Nevertheless, the world is trying to grasp the possible risks and rewards of deglobalization. Most emerging markets are either heavily anti or pro the use of digital currencies but liberal economies are encouraging innovation, anticipating to solve the global currency issue. Can cryptocurrency actually replace the resolution passed in Bretton-Woods conference? Only time will tell!