Jomo: Digital currency regulation no easy feat

This article first appeared in The Edge Financial Daily, on January 16, 2019.
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KUALA LUMPUR: Economist Professor Dr Jomo Kwame Sundaram said regulating digital currencies will not be an easy feat as valuation is highly dependent on perceptions of the financial assets.

“Bitcoin is not easy to regulate because of the very nature of it,” he said, stressing that the public had a “very superficial” understanding of digital currencies.

“Everybody talks about how blockchain technology allows you so much of transparency, but what transparency specifically? It is about confidence. If you have confidence in something, the price goes up. Once you doubt [it], the price goes down. There are no fundamentals involved,” Jomo told reporters yesterday on the sidelines of a World Bank Group conference on globalisation.

According to him, there is a need for a detailed explanation of what cryptocurrencies are about.

“There are a lot of myths about cryptocurrencies and blockchain technology. People have [a] very superficial understanding; it is not helpful,” he said.

“Having superficial comments on it is not very useful. That’s why it is important to get a deeper understanding,” he added.

Jomo also noted that as the world gets more complex, the global economic environment is poised to be challenging as well.

“I think we have a very challenging world environment. People have to realise that the world has changed dramatically. They have to prepare for some difficult times.

“This is just the beginning; we don’t know how long or how deep it would be. We just don’t know; it could be just a passing rain,” he said.

“The economy is not as if it is predictable like some people said. I am not saying that things are going to get bad, but we are a very open economy, and we have a very challenging world out there,” he added.