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The ever-increasing popularity of digital currencies, such as Bitcoin, has led to many banking groups and governments to call for improved regulations and laws. Will the “Wild West of Trading” be reined in?
Cryptocurrency, a type of digital currency, is a relatively new market that has revolutionized trading. Crypto, often described as the ‘wild west’ of trading due to its volatility and lax regulatory practices, has seen a dramatic rise in popularity. The ongoing pandemic has caused many consumers to stay home and seek online solutions for essential services. This in turn has seen a boom in digital currency and eCommerce.
The ever-increasing popularity of digital currencies, such as Bitcoin, has led to concerns from regulatory bodies and oversight. What’s more, countries such as China are paving the way for a cashless society by rolling out digital versions of their nation’s currencies. In this article, we’ll explore digital currencies, why they’re a cause for concern for governments and ultimately how you can take advantage of this volatility.
What is digital currency?
Digital currency, as the name suggests, is a currency that is only available in electronic form. These digital records are stored in an online database and distributed either via digital files/transaction or stored within an e-wallet. Digital currencies include cryptocurrencies (Bitcoin, Ethereum), virtual currencies (Facebook’s Libra), central bank digital currencies and e-Cash. While Bitcoin, is the oldest and most popular digital currency, crypto isn’t tied to a single currency and many alternative coins have sprung up, such as Ethereum, Ripple, Litecoin etc.
Bitcoin is a decentralized digital currency and is currently the largest of its kind based on overall market value. It uses technology to transfer from one person to the next, without the use of central banks. Bitcoin is open source, i.e. nobody owns or controls Bitcoin and everybody can take part in it.
3 Key terms to understand:
- Electronic cash is a specific kind of digital money that allows value transfer without intermediaries.
- Cryptocurrency is a mechanism for such value transfer.
- Digital currency links the values being transferred to an external benchmark.
The open-source nature and lack of oversight are particularly alarming for regulatory bodies.
EU calls for digital currency regulations
Finance ministers from Germany, France, Italy, Spain and the Netherlands have called for the European Union to outline rules and regulations for private digital currencies.
Ministers called on the EU Executive Commission to outline new rules to protect monetary policy and EU consumers.
One of the currencies under scrutiny is Facebook’s Libra. The social media giant has created its own cryptocurrency called Libra that is set to be backed by a basket of major currencies in order to maintain a stable value. This type of cryptocurrencies are called stablecoins. The outcome of the hearing in Europe could pave the way for a global standard. Many central banks and financial institutions are concerned that digital currencies could destabilise global monetary policy, facilitate money laundering and compromise privacy.
Sweden clamps down on digital currency
Switzerland has introduced laws regulating digital currencies and blockchain. The laws introduce definitions for digital security exchanges and rules to combat anti-money laundering policies and other compliance measures. Switzerland is home to more than 900 blockchain companies, including Facebook’s Libra.
South Africa’s crypto market acquired by a New York exchange
South Africa has its own cryptocurrency exchange called Luno. It was founded in 2013 though headquartered in London. New York-based Digital Currency Group (DCG) announced that it has acquired Luno in September. The DCG group has backed more than 160 blockchain companies in 35 countries.
China pioneers digital national currency
One-way governments are protecting the sovereignty of their currency is to move towards digital versions. The People’s Bank of China is trialing a new digital Yuan called the Digital Currency Electronic Payment (DCEP). It’s hoped that DCEP will accelerate the country’s move to a cashless market.
Economists report that 83% of digital payments in China are made via mobile devices, compared with 17% through cash and/or bank cards. This environment makes it ideal to move towards a cashless society.
According to the People’s Bank, it will give the government more control over payments currently dominated the private-sector services Alipay and WeChat Pay.
The Bank of Thailand is also working on developing a digital currency.
Dollar’s dominance to end?
As central banks develop digital currencies it could pave the way for a new global digital currency, a move that could spell disaster for the US. A global digital currency could end the destabilizing effect on the global monetary system.
The new infrastructure based on a digital currency means no transactions will go through the international banking system, which will have major implications for all companies and traders alike.
Cryptocurrency is still relatively new in the market and the majority of businesses lack enough awareness to incorporate it into their daily operations. Another barrier for most traders is that the cryptocurrency market is never stationary, exchange rates keep varying which makes it hard to predict trends.
A few reasons why you should trade cryptocurrency with CM Trading include:
- Profit from both uptrends and downtrends – Buying Bitcoin or any other cryptocurrency through a traditional cryptocurrency and holding may be a viable passive investment, however, trading Bitcoin through CM Trading’s award-winning platform allows you to speculate and potentially profit regardless if the price is going or down.
- Ease, security and accessibility – Since you don’t need to own any cryptocurrency beforehand if you want to speculate on price movements through online trading, this alleviates the hassle of exchanging your local currency to crypto and managing an e-wallet. However, clients who already own some crypto in a wallet are also provided with the choice to fund their trading account with cryptocurrency as well.
- Increased profits through leverage – One of the great advantages of trading cryptocurrencies online with CM Trading is the ability to use leverage, which allows traders to trade much larger positions that their initial investment can afford and thereby providing them with the potential to magnify their profits remarkably. CM Trading offers 1:5 leverage on all currently available cryptocurrencies.
- Access to a diverse crypto offering – CM Trading offers clients access to the four most popular cryptocurrencies with the largest market capitalization. Trade Bitcoin, Litecoin, Ripple (RPX) and Ethereum (Ether) with the best trading conditions available.
Discover the benefits of trading cryptocurrencies online by joining CM Trading today. As an online forex broker, we strive to equip our clients with the best tools that help them achieve their goals and improving our offering in order to include the assets that provide them with the most exciting opportunities.