An Exploratory Study on the adoption of Cryptocurrency as an alternative Currency in Malaysia

Sheila Ainon Yussof, Abdullah Masoud Humeid Alharthy, Hichem Chahed

Abstract


Virtual or digital currency or popularly known as Cryptocurrency or Bitcoin, is pressurizing central banks to manage the looming threat of redundancy as cryptocurrency is seen to slowly overshadow fiat currency in a world of infinite Fintech possibilities. It is slowly descending on regulators to make a change in the way they conceptualise money and what money can be. Traditionally we have known money to serve as a medium of financial exchange, legal tender for repayment of debt, standard of value, unit of accounting measure and a means to save or store purchasing power. Unlike fiat money, a cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and control creation of additional units of the currency. It uses blockchain technology to make electronic payment possible between two people directly, without going through a third party (like a bank) or expensive intermediaries and cutting out the middlemen. Cryptocurrency like Bitcoins are produced through a virtual “mining” process and stored in a virtual wallet and designed to have scarcity value to make it more valuable than dollar minted in unlimited supply. The interest in cryptocurrency is further intensified by the growing distrust in fiat money which is based on a lending/debt concept, whereas cryptocurrency is asset based. This study will explore the possibilities of adopting  cryptocurrency in Malaysia and mainstreaming it.It will critically examine the claim that cryptocurrencies have more “intrinsic value” than government issued money (fiat currency) and whether there is a real or perceived threat to central banks’ monetary and exchange rate policy. To protect consumers, the concerns/issues on legality of cryptocurrency will be addressed whilst highlighting the likely consequences of an unregulated global economy,where cryptocurrency is used as an alternative currency. Recommendations are made in this study for a regulation of cryptocurrency to prevent webcrimes, tax evasion, fraud, online black markets and money laundering. This research will also explore the possibility of making cryptocurrency a Shariah-compliant digital currency. It should also be made a study in Islamic finance on whether it can be backed by gold.

 


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