Article by Phil
We’ve looked at cryptocurrency (and its dangers) before. In our view it remains a high-risk unregulated investment.
We have lots of issues with it. Not least its volatility. The uncertainty of ownership. Difficulty in realising its value. Its tax status. And probably most importantly its ownership and use for all types of illegal activity, from drug trafficking to arms dealing, to slavery etc. We don’t see how cryptocurrency can be part of a mainstream portfolio in its current guises. (Others may disagree).
But that’s not to say things won’t or aren’t about to change. The Economist has run a headline article this week (10/5/21) suggesting that mainstream cryptocurrencies are not that far away.
The article suggests that a number of Central Banks including the Bank of England, European Central Bank and US Federal Reserve are all looking at how they can create centralised cryptocurrencies. Unsurprisingly China have already created their own currency. Centralising and controlling cryptocurrency make sense to control all the negatives we’ve mentioned earlier. It also seems like the right time, with private digital platforms like PayPal having almost 400 million users. It shows that digital is here to stay.
Creating centralised digital currencies will put monetary control back in the hands of governments The downside is likely to be felt by existing banks who are likely to find it harder to attract deposits if central Banks are guaranteeing deposits (which they would). That could affect overall private lending and is something to watch out for. But it seems certain that creating mainstream government owned (and most importantly – regulated and protected) digital currency is the way forward
