Make no mistakes, bubbles or not, cryptocurrencies are here to stay and will represent a huge wave of wealth creation –some estimate in the trillions of dollars.
The really burning question right now is whether nations will be able to adapt to this new economic reality fast enough and become true Crypto-Nations: a nation where cryptocurrencies are embraced, clearly and fairly regulated, taxed, powering multiple level of their economies, capital formations, and workforce, while improving overall value creation and political impact on a global scale. This, of course, won’t happen overnight, but some countries are further along, or more disposed to the future than others.
Nation-states can toy with the grand idea of a national digital currency, but it’s far from clear yet that this will actually be adopted . It will be particularly difficult for those national digital currencies that are not decentralized.
Still, there are many areas where governments could, today, invest in blockchain-powered projects that could impact their citizens positively. Estonia, for example, is showing the way with e-residency, Identity and credit registry and certification, which could be perfectly decentralized and run on the blockchain straight to citizens. Innovative projects like Civic, uPort and Thekey could even be leveraged to empower governments and citizens. Donations in case of national emergencies could be made in cryptocurrency.
Becoming a crypto nation matters because, if your country doesn’t compete for the value and wealth that will be generated, and if it doesn’t promote and harness the talent needed, it will fall behind others who are. Some “smaller” countries have understood this opportunity.
Singapore, Hong Kong, Estonia and Switzerland are becoming crypto powerhouses. Switzerland alone has attracted half a billion dollars worth of fresh ICO capital in the first half of 2017, a close second to the USA .
So what does it take for a nation to become ‘go crypto’?
- The first step for a nation trying to embrace this wave is to responsibly encourage –and not just warn– its own citizens to own cryptocurrency. The way to do this is to set an example. Owning crypto is the very first step to understanding crypto, and demystifying all the negative press (which is sometimes deserved) around the industry. Governments should encourage its offices and officials to own a crypto wallet, and even provide them with some crypto assets to learn about the space.
- Then, governments will have to beef up their tech capabilities, tech staff and budgets, and also invest massively in future talent, which is dangerously in short supply. The education system needs to train a lot more engineers in all fields at the youngest age. Children trained by games and mobile apps understand more than anyone else the value of digital assets. The education system cannot ignore that. Investment in infrastructure to support the industry is also necessary, for instance, in electricity (crypto consumes a lot of power).
- Banks and Central Banks have to be brought on-board. They need to understand that not all crypto businesses are shady, and that it is OK to run a crypto-related business, provided some key rules are respected. Banks are not going to go away anytime soon: as a matter of fact, the opposite may be true, since banks could become key players to onboarding crypto users, who currently don’t trust the system because they lack basic information, understanding, or even the time to learn. Cryptocurrencies are not a replacement for money or the banks’ business, but fuel for a new type of economy being built in front of our eyes.
Of all the developed economies, Japan seems well ahead, declaring Bitcoin legal tender and showing support for registered exchanges, making cryptocurrency a viable business opportunity for their entrepreneurs, a viable investment for retail and institutional investors, but also a true popular digital asset accepted in tens of thousands of shops across the country. This government is an example in many ways but not necessarily a replicable example: Japan has a consensus based culture which dovetail naturally with the core principles of a blockchain, and the country has a long tradition of adoption at scale of digital cash and rewards which makes cryptocurrencies a perfect match.
At the opposite end of the scale there’s Israel, a Hi-Tech powerhouse, but where banks make it virtually impossible for investors to deal with anything related to cryptocurrencies, and make life difficult for crypto entrepreneurs and services. This is due mostly to misinformation and the lack of a clear regulatory framework.
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