The Banking Executive Magazine - March 2021

Cryptocurrency Cryptocurrency (lack of) Regulations: OVERVIEW, RISKS, AND OPPORTUNITIES In early 2017, cryptocurrency be- came a global ubiquitous topic when Bitcoin value to US dollar increased in over 200 percent from 2014, and by around 4,000 percent by late 2017. This rapid increase is reflected in the nominal value of Bitcoins from less than $0.01 in May 2010 to more than $19,700 on December 17, 2017. Since then, cryptocurrency has been viewed by many as an easy way of making profit, and despite being decentralized and unlinked to any central authority, cryptocurren- cies gained trust among individual investors and firms. Recently, as Elon Musk announced his interest in pur- chasing Bitcoins, and Tesla an- nounced the purchase of $1.5 billion Bitcoins, the cryptocurrency’s value surged with around $12,000 increase to reach $44,000 in February 2021. With all the hype and positive news on cryptocurrency and the conse- quent opportunities to make profits, certain questions on the accompany- ing risks arise. The first natural risk is the possible devaluation of the cryp- tocurrency like any other currency or commodity due to lower demand or increased supply. In this regard, while Bitcoin is not the only cryp- tocurrency, but despite its success it still had periods in which its value dropped hundreds and even thou- sands of US dollars in a short period of time. In addition to the volatility risk of cryptocurrencies, the risk of techni- cal glitches and hacking remain where the world had witnessed nu- merous scams and hacking incidents costing firms and individuals hun- the BANKING EXECUTIVE 58 ISSUE 147 MARCH 2021 By: Dr. Mohamad Hussein Mansour, Consultant at the World Bank Group, Lecturer at AUB and LAU