CAN CRYPTOCURRENCIES BE THE SOLUTION TO THIRD WORLD COUNTRIES FRAUD AND TRANSPARENCY PROBLEMS?
A Major problem of Developing countries, especially emerging markets, is fraud and embezzlement. News about Latin America’s biggest embezzlement ever, which took place in Brazil over its state oil company contracts and investment firms’ vanishing funds, is worldwide. Blockchain technology can solve all of these problems with financial transparency. Currently, banking and financial transactions are in a closed system controlled by central banks and governments; therefore, there is no verification system outside the establishment. And this becomes a problem when the government officials are part of the problem, as their own embezzlement or granting the power or contracts to others by bribes. So is creating a transparent financial transaction system really that hard?
How can cryptocurrencies help?
Cryptocurrencies like bitcoin and ethereum are all located on a public ledger called the blockchain. The blockchain is where all transactions are recorded, and every single transfer is confirmed. The blockchain is publicly accessible to anyone in the world, regardless of rank or even ownership. This is done by a program installed on the blockchain, called explorer. You can see every transfer with amounts, origin and destination wallet, and even the fee they are partying to transfer this. Each transaction also gets a HASH, a key that confirms the transaction confirmation and can be accessed via the explorer at any time in the future. So cryptocurrencies have already done the job for governments. Therefore, we know that the technology exists and is being used right now.
How to introduce the system?
El Salvador made history by becoming the first-ever country to recognize bitcoin as a legal currency within the country. It’s also worth noting that their legal currency before that was the US Dollar. Countries recognizing already established cryptocurrencies as a legal tender could be one solution. However, if there is another system in play, Powerful figures can still conduct their fraudulent and illegal activities through the other system. Another example of the implementation of blockchain technology in the financial system would be China’s digital Yuan. China issued its digital currency, which is largely based on blockchain technology and is even held in wallets similar to cryptocurrencies. But if the government controls the whole system and it’s not publicly accessible for everyone to see, what has really changed?
“If it walks like a duck and talks like a duck, then it’s a duck.”
So if there is to be a new system, like the one that the Swedish government is proposing, there should be public access to transaction details. Needless to say, personal information is not necessary for publication.
Why should they engage?
This is an excellent and sound question. Why would governments get involved with this while the whole idea of a government is control?
Cryptocurrencies are not going anywhere. No matter what governments do, people will still use them. It’s the core reason they were invented, to escape government control through public decentralization. Because of this, governments really don’t have a choice. They should create a rival system that people can use with the same features or head for failure and defeat. The US Federal reserve and Russia’s central bank have already stated that they have programs to issue their digital currency.
No government likes to give up its control over the country, specifically its financial system, but it will become obsolete if people don’t use their systems. Think of it as if no one used passports, then what’s the use of them?
Issuing a digital currency within any government is inevitable, but its timing and qualities are important. If the digital currency were closed more than the current banking system, fraud and embezzlement could continue. But developing countries could get in early on the game by starting this system before developed countries release their more popular ones. Stopping fraud can also increase production and GDP.
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