Learn to accept digital currencies as a viable alternative, says author

 

Redza Arbee warned that the world would likely see an ‘unprecedented level’ of austerity within the next few years, due to the current global wave of inflation and the huge debt faced by many major economies.

PETALING JAYA: Everyone should learn to accept digital currencies, such as Bitcoin, as a viable alternative to fiat currency, says the former head of digital adoption at Khazanah Nasional Bhd.

Redza Arbee, who recently published his latest book “The Digital Transformation of Money”, said digital currencies are now considered an alternate store of wealth, and serve as a potential hedge against inflation.

He pointed to Bitcoin’s main appeal in its function as a ledger of financial transactions with decentralised management, with every transaction being recorded and shared by all its participants.

“Every transaction from every person who uses that particular network (and) transfers from one account to another account, all are recorded on one list, one book, one ledger,” he told FMT.

This, he said, protects the currency and its value from manipulation or censorship by authorities.

Bitcoin derives its value as a cryptocurrency from its forced scarcity – 21 million units in existence – as well as the impossibility of counterfeiting it.

At the time of writing, the “live” price of Bitcoin (BTC) was US$63,533 (RM301,104) per unit. As such, most trades in the currency are in fractions of the unit.

Redza said while he does not advocate for Bitcoin’s total adoption everywhere, it should be seriously and strategically considered as an alternate store for wealth beyond traditional fiat currencies or bonds and shares.

“As a country, state, company, or society, where do you want to store your wealth? I’m not saying go 100%. Far from that.

“All I’m saying is understand how it works. Understand what makes sense for you in the short and long term.

“Understand the different options and risks. Everything has risks. And then consciously make a strategic decision,” he said.

Redza’s temperance in advocating Bitcoin as an option likely comes from the apprehension some have of its value as a hedge against inflation.

Even though Bitcoin by nature cannot be diluted through inflation, Nasdaq cautions its price remains volatile as it is primarily driven by market demand and supply.

The currency’s relative newness also means its performance in diverse economic scenarios is not entirely tested, and its behaviour particularly during inflationary periods remains largely unknown.

Digital currency an option amid impending austerity

Redza warned that the current global wave of inflation, compounded by huge debts faced by many major economies, could lead to an “unprecedented level” of austerity within the next few years.

He said people and policymakers would benefit greatly by keeping up with the increasing adoption of digital currency.

“People need to understand the technologies and then, at the very least, start having a conscious conversation and form strategies to manage these things,” he said.

Recent news seems to support Redza’s claim. Last year, Reuters reported that the second quarter of 2023 saw global debt reach US$313 trillion, largely driven by developed countries like the US, Japan, the UK and France.

This is three times the 2023 global GDP of US$104.476 trillion, according to Statista, making a global debt-to-GDP ratio (which indicates ability to pay back debts) of nearly 330%.

In nominal terms, this suggests that conditions are ripe for austerity measures.

While major economies such as the US and Europe will be safer from impact, World Bank research shows that emerging and developing economies have been the worst hit by previous debt crises.

The International Monetary Fund estimated that at least 100 countries will have to reduce spending on health, education and social protection to meet debt payments.

Pointing out that an austerity drive will hit the rich as much as it does the poor, Redza criticised the older and wealthier people for their disdain for Bitcoin and other digital currencies.

“They look at things like Bitcoin, for example, and say ‘Ah, that’s for the kids, I don’t know, this technology is difficult to understand. It’s a fad, it’s a Ponzi, isn’t it a scam?’.

“All I’m saying is that we should understand the difference between an account ledger and a transaction ledger. It’s just a book of accounts. That’s it,” he said.

“The Digital Transformation of Money” may be ordered directly from Marsden Law Book here. Alternatively, you may visit their offices in Publika to purchase your copy, or opt for other purchase options. - FMT