National Cryptocurrencies: Future Of Financial System Or Failed Experiments?
National cryptocurrency may sound like an oxymoron to Satoshi Nakamoto and other early Bitcoin developers, who wanted their coin to be a libertarian alternative to traditional currencies issued and backed by governments. But since 2017, when a lot of blockchain projects emerged, several countries came up with this idea. Encouraged by the growing popularity of the innovation, they started to consider the benefits of blockchain-based money.
Normally developing a national coin means creating a decentralized digital version of the official national currency, based on a public blockchain. The price of such coins is sometimes pegged 1:1 with the fiat currency they are linked to (in this case they are called stablecoins), but it’s not true in every case.
Why countries start their own cryptocurrency projects
Since ‘decentralized’ means ‘beyond the control of a central body’, the logical question arises as to why should any government want to launch their own cryptocurrency in the first place. Okay, when a progressive and crypto-friendly country proposes such an initiative, it looks more or less normal, but if a failed state, obsessed with the idea of total control and corruption, does the same thing, it seems weird, isn’t it?
In fact, the reasons why a government may be interested in launching a national cryptocurrency are various. And it should be noted that, though blockchain means decentralization, you can still set the basic rules, being its creator.
Let’s review some reasons behind national crypto projects.
First, as a state, you can benefit from such things as easier, cheaper and faster transactions and high level of data security. Current banking systems and databases are difficult to maintain. Irrationally over-priced and complicated procedures of currency exchange and payment processing discourage entrepreneurs from doing business on a smaller scale, when potential profits are not worth the trouble. Blockchain may be a solution here, making business interaction much faster and friction-free, on international level especially.
Second, it is capable of reducing or even eliminating the paperwork still involved in many official processes. Third, it can help combat money-laundering and corruption, which bedevils some developing economies.
Also, there are economies largely based on money coming from abroad — from workers who send a share of their earnings to their families. If those migrant workers use a blockchain system for money transfers, no fees will be paid to Western Union and other ‘leaders in cross-border money movement’, who charge about 10% of the amount sent.
Thus, if you have the best interests of the people in mind, blockchain has a lot to offer.
Other countries may care less for their individual citizens, seeing a national cryptocurrency as a method to avoid sanctions, reduce the national debt (a national coin listed on major exchanges is likely to grow in price) and stabilize the economy. At least, those goals are often declared officially.
We have made a list of national cryptocurrencies with the most media coverage. Some of them might have a bright future, others were initially overhyped but are unlikely to play the role they were meant for.
Emcash is Dubai’s first official cryptocurrency that will run on its own blockchain. The coin is designed to facilitate various financial transactions in Dubai and act as a strong economy facilitator. According to Ali lbrahim, Deputy Director General of Dubai Economy, the innovation “will change the way people live and do business in Dubai, and improve ease of business and quality of life.” We remind you that Dubai is planning to go paper-free within a couple of years, becoming the world’s first blockchain-built state.
Another country whose government is very enthusiastic about going blockchain is Estonia. Back in 2017 it proposed to launch its own national crypto Estcoin based on Ethereum standard and pegged to the euro. The ETH creator Vitalik Buterin supported the initiative, but the project has been facing a lot of challenges and raising serious questions as to how exactly the coin will be used and distributed among the citizens. Being a part of the Eurozone, Estonia has no currency of its own, and the European Central Bank is against any attempts to create it.
At this stage it is still unclear if the project will survive — according to what Estcoin author Kaspar Korjus says, it is still in the development stage.
The government of Tunisia integrated blockchain technology with eDinar to create the national payment platform called Monetas. The cryptocurrency is growing in popularity not only in Tunisia, but in other Arab countries. It is widely used by people for making money transfers, paying bills and securing their government-issued documents. One of the major benefits of the system is that it increases financial inclusion of unbanked citizens (in case of Tunisia they are no less than 20% of the population).
The government of Sweden announced its plans to launch a digital version of their state currency krona. Such an enthusiasm is explained by the fact that Sweden is rapidly moving towards the bright cashless future, and the authorities are concerned that citizens might stop using cash altogether and switch to a digital currency, provided by private agents, and not by the government.
If cash is marginalized, E-krona ‘could ensure that the general public still has access to a state-guaranteed means of payment’, the Riksbank report states. Today many retailers in Sweden refuse to accept paper money, and few people actually use cash. It carries the risk that, one day, the people unable to keep up with the progress might be excluded from the economy.
Presently the project is waiting for approval.
Russia might come up with its own stablecoin in 2 or 3 years, according to some senior politicians of this country. Anatoly Aksakov, Chairman of the financial markets committee at the State Duma (Russian Parliament) declared that the Cryptoruble “will not differ in any way from the fiat ruble, except that it will exist on the blockchain.”
Nevertheless, the emergence of Cryptoruble greatly depends on if the package of related laws will be accepted. Currently Russia finds itself in ‘a limbo’ regarding this issue, the Duma’s regulatory initiatives met with scepticism on the side of the country’s central bank, which allegedly delays their implementation. On the other hand, President Putin seems to be in favor of the concept, having ordered to conduct a study on the subject.
In 2018 Venezuela launched its own cryptocurrency named Petro. The coin, as the name suggests, was initially supposed to be backed by the country’s oil reserves. The government of Venezuela planned to use Petro to avoid the economic sanctions imposed by the US and other states. They did not really succeed here, since no international exchanges accepted the coin.
Besides, President Madura made a strange move in August 2018, when his government first devalued the bolivar (the national currency of Venezuela) and then pegged its value to Petro. For many, it was a proof that that the government did not really understand the basics of economy, despite of their attempt to become one of the ‘crypto’ pioneers.
Aurora coin was created in 2014 for making peer-to-peer transactions between Icelandic citizens. The reason why it emerged was the limited use of cash in the country. The coin was nicknamed ‘Icelandic Bitcoin’, and the team behind the project was anonymous. Nevertheless, they kept working on it for some time and airdropped half of the total coin supply to Icelandic citizens.
Later the Aurora project faced some harsh criticism from the officials and was removed from many exchanges. Now it looks like Icelandic crypto dream has been lost, judging by the very low trading volumes and the lack of news from developers.
Reportedly, Iran is launching its own gold-back cryptocurrency called PayMon. Four major banks united with blockchain startup Kuknos to create the coin. The basic goal of PayMon is to tokenize the Iranian fiat currency, the rial, making both domestic and cross-border transactions easier, faster and harder to track. The main goal of the cryptocurrency is to bypass the sanctions enacted by the U.S. through untraceable banking operations.
Once the CBI (Central Bank of Iran) approves the use of PayMon, the coin will be tested by banks. It’s interesting, that this innovation might lead to blocking the use of ‘unapproved currencies as a means of payment’. Meaning Bitcoin and others.
Do national currencies have any future? It is a good question, and the answer is probably no. So far, the experiments with national currencies has not been very inspiring, the initiatives facing a lot of challenges.
Many experts argue, that most governments are not really interested in such projects (say, the US Federal Reserves has made it very clear they do not support this idea), or at least are unwilling to provide funds for them.
As for the crypto enthusiasts and potential users, they often see the government issued cryptocurrency as something fundamentally wrong and antagonistic to the ideas of the founding fathers. Some say this ‘centralized-decentralized’ format combines the drawbacks of both crypto and fiat, since it offers no anonymity and independence but demands technical literacy and a high level of personal responsibility.
Anyway, it’s interesting to follow the top projects to see what they evolve into.
If they will.
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