Cryptocurrency in Australia. The future, or too dangerous to touch?

Cryptocurrency in Australia
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    Cryptocurrency in Australia. The future, or too dangerous to touch?

    Cryptocurrency has no real value.

    Warren Buffet, arguably one of the greatest fundamental share investor of our time. The “Oracle of Omaha” has accumulated a $100 billion-plus fortune running Berkshire Hathaway for over 45 years.

    Warren Buffet

    The Governor of the Bank of England said recently of cryptocurrencies.

    Andrew Bailey

    Michael Saylor, the CEO of Microstrategy a Nasdaq-listed company which has heavily invested in Bitcoin.

    Michael Saylor

    Jim Harper, a Nonresident Senior Fellow at the American Enterprise Institute, stated in a blog post in March 2021 in response to comments on cryptocurrency’s lack of intrinsic value.

    Jim Harper
    Cryptocurrency is used for money laundering and illegal activities.

    Under Australian Law any Cryptocurrency Exchange must be registered with AUSTRAC’s Digital Currency Exchange Register. This is legislated under Part 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.

    AUSTRAC is the Australian Government agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organised crime.

    In 2017 Helene Rosenberg, stated in a white paper.

    Cyber Crime sm

    According to Elliptic who use of blockchain analytics for financial crime compliance. In their publication on 09 December, 2020 Financial Crime Typologies In Cryptoassets: The Concise Guide for Compliance Leaders. 

    • Illicit activity accounts for less than one percent of cryptocurrency transactions.
    • Of that one percent, scams make up the vast majority of that activity, not terrorism, trafficking, or money laundering.
    • From 2017 to 2020, the vast majority of criminal economic activity was conducted through traditional financial institutions.
    Governments can not control cryptocurrency.

    For a government, control over currency is deemed the core of a nation’s fiscal policy. It is a major concern because governments deliberately increase or decrease the amount of money circulating in an economy in order to stimulate investment and spending, create jobs, or avoid out-of-control inflation and recession.

    The Reserve Bank of Australia indicated in March 2021, through Governor Philip Lowe, that they were considering launching a central bank digital currency (CBDC) to reduce the use of paper money.

    Philip Lowe

    Critics of the current central bank system are concerned that monetary control is too important to leave in the hands of a small group of un-elected people. The board of the Reserve Bank in Australia’s case.

    On the other hand a decentralised financial network, powered by its users. Classed as DeFi or Decentralised Finance, it is described by its pundits as an open and global financial system for the age of the internet. Born from the financial crash in 2008 to be an alternative to an opaque, tightly controlled system held together by decades-old infrastructure and processes. 

    In the world of cryptocurrency, you are in control. A cautionary word.

    Cryptocurrency is new, the technology is new. The blockchain underlying the top coins like Bitcoin and Ethereum are demonstrably robust. However there are many pitfalls.

    While the blockchain is secure, third party platforms that interact with it on your behalf may not be.

    An exchange called Mt Gox was hacked in 2014 causing the loss of hundreds of millions of dollars of Bitcoin. Over four years of operation Mt Gox handled 70% of all bitcoin transactions during it’s peak.

    A good knowledge of wallets and where to store your cryptocurrency is key. 

    Often cryptocurrency holdings are stored on home computers.

    Without adequate antivirus and backup protocols you are exposed and could lose your money.

    Scams abound.

    As with anything these days there is a scam a minute in the world of digital currency. The Australian Government has material worth reading on their moneysmart website  Cryptocurrencies and ICOs.

    In Summary

    On the value, debate I think of it as if you went back in time. Two people were about to exchange goods. One had a couple of freshly caught fish and was to about to trade for some milk and a few eggs. You rock up with with a $50.00 note and say I will give you this for the lot. I don’t think you would get far.

    Illegal activity. Always going to be a challenge but the way I see it cash will still be king in those stakes for a while yet.

    Control is a big one. All I know for sure is that governments better get a handle on it soon, because the uptake of cryptocurrency the world over is faster than anything else in human history. Outstripping mobile phones and the internet itself.

    Overall, cryptocurrency is here and I don’t see it vanishing anytime soon, so we may as well learn the rules of the game. 

    The watchword is do your own research and triple check everything.

    Photo credits: Simon Dawson | Bloomberg via Getty Images, Bermix Studio | Unsplash,  Herald Sun, Photoholgic | Unsplash

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