Monday, March 3, 2014

Mt GOX’s Debacle: A definite learning

World’s largest Bitcoin exchange’s collapse has forced investors in this virtual currency to rethink about their investments. As per the reports, security system of Japan’s based exchange was compromised and lakhs of Bitcoins worth around $400 millions were lost/siphoned off.

It’s an eye opener for the developed and developing economies which were balancing their act together to introduce these “cryptocurrencies” in their economies for daily transactions. The volatility of this intangible currency was astounding, from $30 to $260 then touching $1000 and now dropping back to $550 within 8 months time is quiet tough for any economy to absorb.

In one of the conference, late last year, RBI Governor Raghuram Rajan explicitly highlighted the instability of such currency a threat for the economy. Although, never brushed away the reach-potency of such currency in a country like India where there are about 900 million mobile subscribers out of which 20% have internet connections on their sets but with a tighter control over Bitcoins.

As MT GOX has started counting its days before it completely perishes, similarly one day even Winkdex (active qualified U.S. dollar denominated bitcoin exchanges)would wink off completely until a tighter control is imbibed in its system.

Though one should never undermine the importance of such virtual currency, which would certainly have the next big transactional value as the world takes another leap virtually, a better control/regulation is something which would make such transactions more secure, reliable and worthy.

How to regulate such currencies? What are the steps involved in measuring inflation through these currencies? How to increase the transactional reliability among the users?  The world’s biggest economies should now take some comprehensive steps towards dealing with such issues and making such currencies a viable option for future transactions.

A step in this direction is a must now.