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Why Are Governments Creating Their Own Cryptocurrencies?

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Following the rise and the fall of Venezuela’s ‘el petro,’ government issued crytpos have become a popular topic worldwide, with emerging economies and economic powerhouses alike showing interest in introducing their own digital currency.

While Venezuela may have been the first nation to attempt to dive into the crypto-world, it will certainly not be the last. After all, everyone loves ‘the tech behind bitcoin.’

From dodging sanctions, propping up a struggling national currency, or simply going cashless, there are numerous reasons why a country may look into creating its own centralized coin.

Sanctions

Venezuelan President Nicolas Maduro was not shy when he explained why his country would be launching its own cryptocurrency. Economically benched by Western sanctions, he hoped that it could act as a new medium of trade which could circumvent some of the country’s biggest roadblocks. And in a new report from TIME, it seems Russia, another country facing Western economic blockades, may have lent a helping hand.

While the Kremlin did not respond to TIME’s questions, the idea could have some merit.

Russian President Vladimir Putin confirmed in October that the country would be considering its own “CryptoRuble,” with Putin’s economic advisor, Sergei Glazyev, suggesting that the coin could help Russia alleviate the pressure from Western sanctions. 

Despite this, Russia’s overall sentiment on cryptos remains mixed. Putin himself stated: “It is known that there is nothing behind the cryptocurrency, and it cannot be a store of value, it doesn’t have any material value, and it’s not backed by anything...”

Iran has taken a similarly coy stance on the subject. Related: Best Buy Drops Telecom Giant Over National Security Threat

Another country facing tremendous economic hurdles, Iran has flown under the radar in regard to its cryptocurrency development. The country’s Central Bank has taken an arguably strict stance on the subject, but the rise in crypto’s popularity has left the government unable to ignore the trends.

In October, Iran announced that it would be taking measures to create bitcoin infrastructure.

“The ministry of communications and information technology has already conducted a number of research studies as part of efforts to prepare the infrastructure to use Bitcoin inside the country,” Amir Hossein Davaee, Iran’s Deputy Minister of Information and Communication Technology said, adding “Arrangements are being made with the related organizations to put together the infrastructure as early as possible.

Then, on February 21, Mohammad-Javad Azari Jahromi, head of Iran's Ministry of Information and Communications Technology, tweeted that the country would be testing a cloud-based digital currency.

Google translation: In a meeting with the Board of Directors of the Bank on post digital currencies based on the block chain, I was prescribed, the Bank measures to implement the country's first cloud-based digital currency using the capacity of the country's elite. Experimental model for the country's banking system to the examination and approval will be provided.

Like Russia, however, the country’s Central Bank warned: “The wild fluctuations of the digital currencies along with competitive business activities underway via network marketing and pyramid scheme have made the market of these currencies highly unreliable and risky.”

New Economic Tools

Following Venezuela’s announcement, Turkey and Cambodia also released statements regarding national cryptocurrencies.

Turkey, in true FOMO fashion, announced plans to create the Turkcoin, despite taking a particularly unwelcoming stance on the subject in the past.

MHP deputy chair and former Industry Minister Ahmet Kenan Tanrikulu noted: “We need to create the infrastructure for the blockchain database. There are nearly 1,400 digital currencies in the world today and many countries are using them. We, too, can create a digital currency, based on companies in the Wealth Fund. Since the demand exists, we should create and release our own digital currency. Opposing those currencies is meaningless. This is a national issue which requires a national consensus.”

Tanrikulu stressed the need for regulation, explaining that cryptocurrencies were already being used, and that the government could benefit from creating crypto infrastructure to support, tax, and prevent illegal transactions.

Where Turkey is worried about missing the bandwagon, Cambodia is taking a slightly different approach. Following promising growth in recent years, Cambodia hopes to use blockchain technology, in addition to its new cryptocurrency, Entapay, to hasten its economic development and join the global conversation on finance, technology, and politics.  

In a press release prior to the ASEAN 2018 BlockChain Summit, which will took place in Phnom Penh,  the Cambodia Blockchain Industry Development Association noted: “Entapay will be expected to become the connection between integration payment of encrypted currency and the real world. It has the great potential to even replace VISA as the new mainstream payment mode.”

Related: Trump Hits China With $60 Billion In Tariffs

Men Sam An, Deputy Prime Minister, sees promise in blockchain development, as well, suggesting that it could be a key tool in Cambodia’s economic growth.

Going Cashless

Sweden is one of the few countries where its Central Bank has actually truly embraced the idea, launching a full report in September 2017. As the country moves towards a cashless system, the potential role of cryptocurrencies has not gone unnoticed.

In the report, the Riksbank outlines the benefits of an ‘e-krona’ system, including addressing future problems with cash payments, such as costs and inefficiencies which have sparked the decline of payments using physical currency.

The report also outlines the country’s dependency on its only clearinghouse, Bankgirot. With the introduction of the e-krona, a new realm of payment service providers, not dependent on expensive infrastructure or settlement services, could thrive, removing some of the high processing fees and risk carried by the current system.

The e-krona, if implemented, would supposedly be pegged to the country’s national currency, the krona, and constitute a claim on the central bank (Riksbank). Additionally, it would be available for payment/transfer 24 hours per day, 7 days per week, 365 days per year in real time, and unlike the current system, the e-krona infrastructure could act as its own settlement platform which has the potential to usher in a new era of security and efficiency for the country’s payment services.

Conclusion

Regardless of the reasoning behind a country’s move to create a national coin, it’s clear that interest is growing. While some may be moving faster than others, there is an entire list of countries working on their own cryptos, from Japan to Uruguay, and it is clear that 2018 is shaping up to be the year of government cryptos.

Decentralization enthusiasts need not worry, though. Twitter CEO Jack Dorsey says, despite the rampant development of gov-coins, bitcoin will be the world’s single currency within the next ten years.

By Michael Kern via Crypto Insider 

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