Cryptocurrencies and digital banks are huge in 2020 and 2021 as the world recovers from the COVID-19 pandemic. China recently launched its digital Yuan and many have started to ask if there could be more coming soon.
Jumping onto the bandwagon
Malaysia has been picking up speed in the digital currency markets with the approval of 3 Digital Asset Exchanges (DAX) as well as several cryptocurrencies. Digitalization has taken the stage for 2021 and surely the next few years. Bank Negara Malaysia recently stated that technological advancements will be the key to the rising adoption of digital payments and privately-issued digital assets like Bitcoin and Ethereum are set to take center stage as well.
The volatility of the markets
That which puts off most people and traders when it comes to cryptocurrencies is that their price change can be too volatile. In the first 4 months of 2021 alone, the price of BTC (Bitcoin) has surged and then fell and surged again numerous times, changing the value of the token tremendously. This makes it difficult with the rising demand for RPP or real-time payments platforms for the domestic market. Moreover, with the pandemic forcing people to stay indoors more, digital transactions like e-commerce and investments have become widely popular and this trend is set to continue in the coming months.
When digital assets today do not have the universal characteristics of conventional money, their stability and scalability come into question. At the moment, a few cryptocurrencies have tried to overcome this issue by being linked to backed by fiat currencies. This is to help them minimize the impacts of the market volatility. Stablecoin is among those that adopt this concept.
However, there have yet to be any decisions made about having Malaysia’s own Central Bank Digital Currency or CDBG as it would take a monumental effort by all parties and stakeholders involved in this market. Bank Negara will continue to assess the potential value proposition of such a platform but given the current and rapid developments of digital assets both within and outside the country, the call for a digital currency could well be evident in the near future.