Cryptocurrency regulation, expected  to be introduced next year, will spur trading and boost govt’s revenue

By AFIQ AZIZ / Pic By BLOOMBERG

Cryptocurrencies, especially bitcoin which had plummeted to recent lows, are going through a phase dubbed “crypto winter” and prices are expected to bounce back when demand recovers.

The most popular digital token has remained in the red, having lost more than 68% of its value this year. Bitcoin’s value jumped 19-fold to reach about US$19,000 (RM79,682) in December last year.

A local industry player said the trend has not reached an alarming stage as bitcoin has survived major volatility since 2009.

Blockchain Academy Asia CEO Effendy Zulkifly said digital currency tends to shed market capitalisation near year-end as consumers cash out for end of year spending.

“Based on the analysis from 2009, we can see that the currency experiences steady downtrend during year-end long holidays, as well as Chinese New Year, which will happen in the next few months,” he told The Malaysian Reserve recently.

He said bitcoin’s current price level is still far above the price when it was first traded in 2010.

In June 2011, it rose to a new all-time high of roughly US$30. But by November that year, the cryptocurrency dropped below US$2.50, shedding more than 92% of its value.

“Bitcoin’s exponential hike is actually thousands percent compared to the year it started trading. So, if we want to make a volatility study, we should consider the trend from 2009 and not just based on last year’s levels,” he said.

Bitcoin has recovered from its recent lows to trade around RM17,416.39 last Friday,

Another industry observer expects bitcoin’s price to rise next year, following the establishment of “Bakkt”, a new corporation initiated by several big investors and tech experts in the US.

The new venture, which is expected to be launched next month, includes Boston Consulting Group Inc, Microsoft Corp and Starbucks Corp, among others.

It is being formed by the Intercontinental Exchange Inc, which aims to transform bitcoin into a trusted global currency with broad usage. 

The integrated platform will enable consumers and institutions to buy, sell, store and spend digital assets on a seamless global network

“Its first case will be for trading and conversion of bitcoin versus fiat currencies, as bitcoin is the most liquid digital currency presently.

“That will instill more confidence in investors and users to trade via the digital asset, thus increasing its market capitalisation,” the analyst said.

Effendy said regulators’ attitude around the world towards the industry had somehow hampered its rise.

However, he said the Malaysian government’s regulation, expected to be introduced next year, will spur cryptocurrency trading, as well as boost the government’s revenue.

“Japan, Singapore or even Switzerland — the developed countries with advance financing institutions, already have a regulatory framework for this market.

“If it can be regulated properly, the Malaysian government will also gain tax (revenue) from this market, like Japan,” he said.

Japan regulated bitcoin in March 2016 and announced that the digital token is a legal tender for payment.