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Government finance, cryptocurrency and blockchain

04/19/2019
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The Asia Times agency reported that three countries in the region are studying the topic for issuing government bonds in bitcoins. Tunisia, Afghanistan and Uzbekistan are now actively considering the possibility of attracting funds through the blockchain. Despite the apparent benefits of such a placement, international financial institutions warn of the risks of such actions.

How to get a loan through blockchain

In search of funding, the authorities of the three Asian countries are ready to use a very original method of borrowing. They are ready to issue government bonds in bitcoins. And here there are a number of advantages. Investors can be both large organizations and individuals. Through the use of technology of the distributed registry, everyone will receive the technical ability to place funds in the cryptocurrency.

By storing databases on a large number of devices, distributed registry technology protects information from unauthorized access. It can only be changed as a result of consensus between the nodes.

There is no need to use a large number of intermediaries in the form of trading platforms and introducing brokers. This significantly reduces overhead costs and provides access to liquidity markets, even for small capitals. The launch of government bonds on the blockchain will allow cryptocurrency owners to receive additional income.

Risks of government bonds for the financial system

However, now there are a number of unresolved issues. The fact that Tunisia, Afghanistan and Uzbekistan are ready to launch their debt obligations in bitcoins, radically changes the balance of power in the financial markets. The fact is that investors have the opportunity to make a profit with minimal risk. However, the countries themselves may be trapped. In terms of technology development, there are currently no obstacles to the launch of government bonds in bitcoins. However, the problem is the instability of the course.

During 2017, the price of Bitcoin increased from $ 1,000 to $ 19,000. The growth of public debt by 19 times is capable of derailing the financial system of almost any country.

Although the capitalization of the cryptocurrency market has grown significantly in recent months, it still falls below the $ 200 billion threshold. The simultaneous purchase of 20,000 bitcoins on April 4 led to an increase in price by more than 20%. Entry into the market of public capital borrowing will lead to unpredictable consequences.

The position of the IMF and the World Bank

Global financial institutions are ambiguous about the idea of ​​borrowing in bitcoins. However, they are ready to recommend to explore a different possibility of financial reorganization. A few years ago, the head of the IMF, Christine Lagarde, recommended that countries explore the possibility of issuing state-owned cryptocurrencies.

Tunisia is studying the issue of release of state cryptocurrency. The head of the Central Bank of the country is Marouane al-Abassi. Abassi is a supporter of new technologies.

A number of states are consulting and studying the technical possibility of issuing national cryptocurrencies. The authorities of Sweden were the first to announce this, where they came to the idea of e-kroons back in 2017. Here it is planned to reduce cash turnover to a minimum.

However, even the IMF assures that the blockchain will not be able to solve all the problems. Inflation in countries does not appear because of the availability of paper money. It is caused by increased emissions and imbalances between expenses and revenues. And here the distributed registry may be powerless.

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