Singapore-based Ernst & Young LLP Partner Jan Bellens believes "cryptocurrencies are a great innovation with great upsides for the long-term," as long as the two keys issues, named as security and KYC, get resolved in the short-term.
Speaking in an interview with Channel NewsAsia Connect, Ernst & Young's Global Banking & Capital Markets Emerging Markets Leader, Jan Bellens, said his company truly believes in cryptocurrencies' potentials, which he believes hold "many upsides, especially for emerging markets." However, the executive noted that several issues needed to be resolved in the short-term in order for the technology to reach its maximum potential and succeed as global currencies.
Relevant for emerging markets
"Cryptocurrencies offer many benefits especially for emerging markets," started off Bellens. With regards to being easy and less expensive to transfer money, Bellens said the technology holds many potentials, notably in places where payment and banking infrastructures are less developed:
"It's essentially a piece of code that can be transferred over the Internet or over mobile. Which makes them especially relevant for emerging markets."
Although acceptance is relatively limited at this stage, argues Bellens, he believes that the technology's usability and the fact that transfers are easy and nearly instant to process, makes the technology "a potential, acceptable, currency for the future."
Further, unlike the traditional banking system, which depends on central authorities that act as third parties and set policies, cryptocurrencies are decentralized and autonomous. Thus, "cryptocurrencies are really driven by supply and demand of individuals, which makes them truly global currencies," argues Bellens.
Massive security risks
Even though cryptocurrencies offer many advantages over traditional payment systems, there are major issues that need to be resolved, noted Bellens. These issues are security and crimes:
"There are massive security risks. The fact that there are large sums of virtual money involved, attracts quite a lot of criminal activities and quite a lot of security issues."
Further, cryptocurrencies' nearly-anonymous characteristic, have made the technology quite popular among criminals, who are now given the ability to "transfer large sums for money across the globe in an easy and anonymous manner."
Bellens believes that it is because of these major issues that usability is still limited at this stage:
"Acceptance is not very wide spread yet and the number of merchants that accept Bitcoin as a currency is quite limited, which limits its current usability for merchants and individuals alike."
Future of cryptocurrencies
"We think that there are lots of issues that need to be resolved, there is a lot of regulations that needs to be put in place to make sure that this can become a viable currency."
Bellens argues that these issues need to be treated by priorities, naming the most urging one as security. "Our consumer banking surveys and other surveys around the world, show that the security risks are absolute priorities for customers and consumers alike," he explained. "This has to be driven either by self-regulation or by regulation."
Bellens points out that criminal activities linked to cryptocurrencies, make merchants and individuals skeptical to the idea of using the technology as a way to transact. "Trust and confidence in the technology need to be resolved," said Bellens.
"It needs to be a reputation, a trust, that is acceptable for individuals and merchants, without getting into difficulties with regulators or with Governments. Elements of KYC need to be implemented to make sure that the level of criminal activities [...] can actually be reduced."
Apart from AML/KYC rules that are said to be needed in the industry, Bellens highlights the issue of taxation, citing the case of the American IRS having declared Bitcoin and other cryptocurrencies as property rather than currency. "There is still a long way to go," continued Bellens, "and many other regulatory issues and contractual issues will need to get resolved over time."
Finally, Bellens concludes by stating that nevertheless, Ernst & Young truly believes in cryptocurrencies' potential as effective and convenient global currencies, as long as the said issues are resolved.
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