The Banking Executive Magazine - March 2021

Bitcoin traditional investments. Investors consider cryptocurrency as a good investment in times of economic un- certainty because of expected high returns. Large investment in Bitcoin led to a surge in Bitcoin value. Bit- coin are traded on independent ex- changes worldwide. The advantages of investing in Bitcoin are high ac- cessibility, liquidity, returns, and transparency. The disadvantages on the other hand are lack of regulation, limited use, volatility, and lack of se- curity. Today there is over a thousand of Cryptocurrencies worldwide. There are two ways for obtaining Cryp- tocurrencies: buying or mining. Buy- ing involves signing up with a cryptocurrency exchange. Platforms for buying Cryptocurrencies include Coinbase, Binance and Coinmama. Mining is generating new cryptocur- rency by solving complex algorith- mic problems. The computational resources needed to mine bitcoin use huge electrical power. Hence bitcoin mining is not environmentally friendly. Bitcoin can be spent in various places online and offline. Bitcoin ATMs allow exchange of bitcoin for cash. Bitcoin can be converted to cash by selling it in a cryptocurrency exchange. Many Muslims are reluctant to trade cryptocurrency due to surrounding uncertainty and speculative nature. Bitcoin is not compliant with Islamic economy where investment serve the real economy and promote its growth. Thus, Bitcoin is not ideal Islamic investment unless a regulated framework is established. However, Shariah Advisory Council of Malaysia’s advised that it is permissi- ble to invest and trade cryptocurren- cies on registered crypto exchanges. Shariah-compliant crypto exchange won license from Bahrain central bank. CoinMENA is offering spot trading in five major cryptocurren- cies. Bitcoin was designed to replace fiat currencies and becoming a global digital currency. Bitcoin estimated growth is high reaching over $100,000 by 2025. However, Bitcoin cannot replace banks. The rush for cryptocurrency is attributed to a mis- understanding of how money is cre- ated. The value of bitcoin is not backed by anything. Hence, no one can predict the future of Bitcoin. Var- ious scenarios arise: Bitcoin may be digital gold of digital economy; Bit- coin may be regulated and taxed; Bitcoin may be used to buy goods and services; Bitcoin network might be down or hacked; World financial institutions like IMF and central banks might start mining their regu- lated Cryptocurrencies; Bitcoin will replace cash money. the BANKING EXECUTIVE 10 ISSUE 147 MARCH 2021