Bitcoin became popular in 2013, the time when Myanmar is experiencing high inflow of foreign direct investments. The financial sector is among the main beneficiaries of fresh funds and the first among the industries to upgrade its systems a n d i m p r o v e d i t s products and services. Debit and credit cards were introduced and lately, mobile money became part of the services to cater to those who have become accustomed to the use of smartphones. The Yangon Stock E x c h a n g e w a s launched in the later part of 2015 opening up more opportunities f o r i n v e s t m e n t s . M i c r o f i n a n c e institutions enabled the flow of financial resources in rural a r e a s w h e r e o n c e access to finance is a challenge. So many changes in so short a time and the people are barely coping up. The cryptocurrency craze has not spared Myanmar and the big question is, is the country ready?
A sophisticated instrument not for novices
Considered as a disruptive phenomenon, even governments have different reactions to cryptocurrencies. Initially considered as a medium of exchange, it has become a commodity in itself that is traded and became an object of speculation. The complexity of cryptocurrencies is difficult for ordinary people to understand, much less appreciate. The technology behind is known as Blockchain, a system serving as an online ledger of transactions that prevents alteration which ensures the integrity of the whole system. This allows the ‘issuance’ of token coins with a certain value among the people who providing services to those who wants to buy or trade cryptocurrencies.
Trust just like in banks, is one of t h e e l e m e n t s t h a t s u s t a i n s cryptocurrencies. And as the popularity of the cryptocurrencies increased, particularly among millennials, so is the demand which jacked up its value to unprecedented heights. Bitcoin reached its highest value in 2017 and other cryptocurrencies like Etherium experienced the same phenomenal increase in value. News of hacking of some exchanges did not deter investors to pour their money to own cryptocurrencies.
Mixed reactions in Asia Japan where Bitcoin was introduced by Satoshi Nakamoto is at the forefront of cryptocurrency development. It has the most number of cryptocurrencies who have formed associations and lately decided to establish a s e l f – r e g u l a t o r y mechanism to protect the exchanges trading cryptocurrencies. This is a private initiative and the government is also expected to do something about this. It was the opposite in China where the government blocked websites involved in selling and promoting cryptocurrencies. The government feared social unrest as there were strong reactions to the wild fluctuations of cryptocurrency. It seems those who invested were in only for the growth but not with the risk that goes with it.
In the Philippines, the Securities and Exchange Commission (SEC) issued a ceaseand-desist order to stop a company as it launched its initial coin offering (ICO). The Krops, an online market for agricultural commodities connected with a company that was previously delisted by the Philippine Stock Exchange for violation of disclosure rules was stopped from distributing its tokens.
In other ASEAN countries, caution is the policy promoted by governments. Singapore considered as the hub of financial technology in the region has not blocked efforts at promoting cryptocurrencies. It is closely monitoring developments and is working to stabilize the situation. The same situation in Malaysia where the central bank has issued guidelines on how to deal with the growing cryptocurrency market as new exchanges are being set up in the country.
The risk in Myanmar With Myanmar leapfrogging in the financial technology sector, it has become a fair game for those who would like to take advantage of the popularity of cryptocurrency. A browse in the internet reveals a number of sites offering services to Myanmar to own token coins and trading services. There is no exchange at present in Myanmar, but the interest generated might push for the setting up of an exchange. One of the main concerns is hyping up the high value to attract people to buy tokens without making them understand how it works. Sidelining the risk involved just to motivate people to buy tokens may be done with the end view of making investors chalk out more money to buy tokens. Another concern are the scammers riding on the popularity of the cryptocurrencies. The complexities are simplified by scammers by presenting it as some sort a multi-level-marketing (MLM) just to convince people to part with their money with the promise of incredible yield. The hype it has created in the internet can be utilized by the scammers to show that the ‘investments’ are truly global and legal and does not require government regulation. With Myanmar people exposed in social media, the potentials for a big number of people to be persuaded is a reality.
What the government can do
A total ban to cryptocurrencies and blocking sites offering services may not be an appropriate response. People will find ways to go and look for exchanges in other countries like Singapore and Japan and scammers will make it look more sophisticated for investors to place their money in global instruments
On the short-term, the first thing the government should do is monitor the sites offering cryptocurrency services focused on Myanmar citizens. It should look at the sites who are authentic exchanges offering tokens as against those who are using cryptocurrency as a means to swindle the people. Scammers and con sites should be exposed and warned. The government should also monitor developments in other countries as they draft policies and regulations on the operation of cryptocurrencies. The policies developed should be reviewed to check its relevance to the Myanmar context.
Another activity the government can do is strengthen its financial literacy program to make people aware of how to manage their financial resources. Promoting savings and responsible use of loans should be a priority. This includes capacity to analyze investment opportunities, identify frauds and scams and avoid gambling.
The future is here
Cryptocurrencies are here to stay. It may take another form, but the idea of a currency managed by the people who are using it has come. The appropriate perspective maybe is to look at cryptocurrencies as an alternative means of generating funds giving the investors choice to place their money in instruments they trust and value.