Photo: AFP
Digital currency, also known as cryptocurrency, has got more tangible recently after a Canadian mining company Alix Resources said it would pay its exploration contractor in Bitcoins, a kind of electronic money. Monetary authorities have rallied at the news, with the US Senate saying that a virtual money injection into real economy can pose a serious risk for the country. Bitcoins are a sort of digital currency that has no intrinsic value. It emerged in 2008 as compound of the words "bit" (a fundamental unit of information) and "coin." The concept was allegedly introduced by a pseudonymous developer known as Satoshi Nakamoto. The primal feature of the digital money concept is that it is an autonomous system that functions without the intermediation of any central authority. It is managed by a set of algorithms and does not reflect the ups-and-downs of any existing economy, thus being more of a truly global currency. Bitcoins are created by a community of programmers, the so-called "cyberanarchysts," and those who have faith in the future of this virtual money. Alix Resources' Chief Executive Officer Michael England also put his trust in the free coin, saying it was an out-of-the-box idea. However, this way of paying for services might still cost the firm a pretty penny, a Russian expert opines. "I think this idea is a bit eccentric," said Viktor Dostov, Board Director of the Electronic Money Association in Russia. "Companies are free to settle accounts with one another using whatever they want, be it Bitcoins, dollars, or elite puppies." "But by doing so they put themselves at risk twice: first, by having to work out a way to enter them in the ledger without facing money laundry charges afterwards. And secondly, don't forget the fact that Bitcoins are basically speculative currency and its rate against dollar tends to rise and fall with time. So, it's absolutely unclear how these companies are going to hedge the risk." The risk appears to be no big turn-off for those who already use Bitcoins to buy services, shop on the internet and even pay for businesses. In July, an online casino SatoshiDice was sold for 126,315 Bitcoins, or some 11.5 million dollars. Up for sale next are parcels of land. Some companies say they take Bitcoins as payment for their services, and this number is growing. The demand has already driven Bitcoin prices skywards, from 150 dollars per coin in mid-October to 390 dollars within a month. The US Senate has shifted uneasily at the news of Bitcoin success. Senate lawmakers are going to hold a hearing next week to explore the danger of digital money for US economy. Meanwhile, more and more governments are starting to shoot suspicious glances at Bitcoin as it continues its online conquest. "National regulators see the main problem with cryptocurrencies in that their flow cannot be tracked, which makes this type of money a convenient tool for funding all manner of criminal activities," says Sergei Khestanov, managing Director of the ALOR Group. "For instance, they have recently shut down a very popular online shop [Silkroad.onion] that traded in goods banned in the US. It became the biggest drug market online, where people sold over 500 types of narcotics. And most of them paid in Bitcoins, which guarantees anonymity to its buyers and sellers. And this is the topic that will be brought up at the US Senate hearing. Many experts also believe the situation can get out of hand when the number of Bitcoin transactions will rise so high it will start to compete with national currencies. The day when monetary authorities will be forced to take urgent measures is in fact just around the corner," Khestanov warned. "Unfortunately, the very idea of cryptocurrencies means it will be hard to curb their free flow. I think the next decade will see very complicated measures being taken to regulate cryptocurrencies as an economic phenomenon." Yet another argument against cryptocurrencies is that authorities think of it as strictly a means of money laundering, which is used by organs and arms traffickers, terrorists, and drug mafia. Oleg Obukhov Read more: Source: Voice Of Russia, Image: flickr.com
