I have always shied away from writing about cryptocurrencies because I find it difficult to understand how they can fulfil the functions of money as we know it. Moreover, while many see them as an opportunity to make money, others see them as a threat to the global monetary system.

In fact, I have no doubt that national and international institutions do not see much benefit in them. An official of the Bank of England was once reported as having dismissed as “fanciful” the idea that existing cryptocurrencies such as bitcoin could become a standard payments mechanism.

There are some countries which have taken the attitude that “if you can’t beat them, then join them”.  However, this cannot be the global approach to take, and I do not believe that it is the approach that we should take as a country. I can understand that cryptocurrencies should not be made illegal and that trading in them should be allowable. On the other hand, I do believe very strongly that trading in cryptocurrencies should be highly regulated.

Cryptocurrencies do not have any intrinsic value, as much as our money does not. Looking at the US dollar note, one notes the words, “In God we trust”. Gone are the days when the currency in circulation would be backed by reserves of gold, silver and other commodities. Traditionalists still hanker after the days of the gold standard.

If cryptocurrencies remain uncontrolled, governments could face enormous tax leakages and creditors will remain unpaid

However, the value of the international currencies (dollar, euro, pound, Swiss franc, yen, etc) we use today comes from the backing that the state gives them and the trust that people have in their government. When that trust is lost, the currency ends up being weakened and loses value.

Cryptocurrencies do not have such a backing and the people who control them (it would be foolish to think that there are no persons controlling them) could run away and blow up the system. This would not happen with international currencies.

It is interesting to understand the psychology behind the acceptance of cryptocurrencies by a not insignificant number of persons around the world. It essentially boils down to the fact that they want to bypass the system as trading in cryptocurrencies is known not to be traceable. As such payments received go untaxed.

This is all part of a much wider scenario where people around the world are continually finding loopholes to fall out of governments’ radars. Cryptocurrencies are one tool they have that helps them to disappear, so to speak. This is why cryptocurrencies are continually linked to tax evasion, money laundering and criminal activities.

This does not mean cryptocurrencies mean crime. This is why I believe that they should be allowed but should be highly controlled. If they remain uncontrolled, governments could face enormous tax leakages and creditors will remain unpaid. It will be easier for companies to go bust and their owners and directors to disappear.

All this will give cause to the so-called hidden economy to grow even more. The risk is that the hidden economy at a global level could become as large as the formal economy, if not even larger. This would just bring about economic chaos and a total disruption of the world economic order.

I do understand that states cannot just try to eliminate cryptocurrencies, now that these have garnered an element of popularity. However, this could be another opportunity to better regulate the international financial and economic system. One hopes that we do not miss out on this opportunity yet again.