National Cryptocurrencies: To Be Or Not To Be?
Just a few years ago nobody would have even considered the idea of issuing a national cryptocurrency. Since cryptocurrency appeared, they have remained outside the influence of state financial institutions. And only now some countries have started declaring the creation of national tokens. While the purpose of issuing fiat money is to support money supply within a region, aims of governments towards altcoins are different.
So, why do some countries decide to issue national tokens? Let's consider the main reasons.
1. Sanctions or Infrastructure
For several years, Venezuela has been experiencing a severe financial and economic crisis, despite its large oil fields and developed oil industry. In addition, this Latin American state has been under the United States sanctions. As a consequence, it cannot attract investments into the country – for instance, through the sale of its government bonds on international markets.
However, Venezuelan President Nicolas Maduro’s statements in March surprised the world community. During the pre-sale of the national cryptocurrency El Petro, Venezuela has managed to raise $5 billions. However, despite the fact that the Petro rate and oil prices are supposed to be connected, the coin exchange for Venezuelan oil is still not provided, which puts under question the reliability of the national token. In addition, the US introduced new sanctions in early April – this time against El Petro. Hence, the crypto coin is now in danger of becoming extinct.
The government of Estonia has chosen quite a different way to deal with cryptocurrencies. The authorities also decided to issue an Estonian national token and soon announced the launch of the Estcoin project aimed to attract investments. However, the government understands that first it needs to create an appropriate infrastructure in this field. It has developed a plan that includes:
- an ICO for Estcoin;
- the transfer of all raised funds to a public-private partnership that will be engaged in the project;
- providing foreign investors with a digital ID for simpler registration of their companies;
- an ability to pay for public or private services with the help of Estcoin.
At the same time, the government emphasizes that the Estcoin token will not become a national cryptocurrency and will not replace the euro.
2. Combating the shadow economy
The Chinese government believes that cryptocurrencies can make an effective weapon to combat the shadow economy. China officially banned all cryptocurrency transactions in its territory, but later announced an intention to create a national token, which would allow making transparent and controlled transactions. Moreover, the People's Bank of China repeatedly mentioned the need to apply blockchain technology at the state level to reduce the corruption and fraud level in the country.
The shadow turnover of cash in Israel exceeds 20% of the country’s GDP rate. No wonder the authorities have decided to issue a “digital shekel”, whose price will be tied to that of the national currency — the shekel. The government of Israel thus expects to reduce the amount of transactions in the black market.
The goal of the Russian government is not completely clear. According to officials, the first reason to create a Russian national cryptocurrency is the fight against the shadow economy, the second one is the need to provide Russian people with more convenient "digital money", and the third one is the desire to use blockchain technology at the legislative level. At the same time, it is worth recalling that Russia is under the sanctions of the United States and a number of other countries.
Reality or a dream?
So, do national cryptocurrencies have any kind of future? This question cannot be answered in a simple way. When it comes to Venezuela, it is important to objectively assess all pros and cons associated with investing in its token, since it may be risky to deal with the cryptocurrency issued buy the economy that is having a hard time.
The success of China and Israel in their fight against the shadow economy depends on many factors, including a complete refusal of cash and the decision of the world community to allow the global monetary regulation to get along with the crypto sphere. Unfortunately, scammers may find new ways to support the shadow economy even after the total digitalization.
Meanwhile, Estonia's approach to creating a national token looks promising, as the country's authorities want to generate a fundamentally new market infrastructure for cryptocurrencies.
We have listed only the very first attempts to issue national tokens. The success of such initiatives is just a matter of time. First, it depends on the will of governments and their understanding how important this step is. Second, people should have a sufficient level of knowledge in this area and open access to electronic devices. Anyway, there is a high chance we can become a cashless society very soon.