Many remember 2009 as the period of the worst global financial crisis. But 2009 also gave us a new form of currency, redefining the meaning of money. Bitcoin was launched in 2009 by an individual or a group known by the pseudonym “Satoshi Nakamoto”. Bitcoin gave the world the first application of blockchain and opened the realm of digital currencies, decentralised finance companies, and a 24/7 financial trading market.
Bangladesh is one of the few countries in the world that consider bitcoin and all other types of cryptocurrency as “hostile”. Bangladesh Bank considers bitcoin and other cryptocurrencies as illegal under the Foreign Exchange Regulation Act, 1947, and the Money Laundering Prevention Act, 2012. However, there is much debate on how these laws can be enacted in court since the central bank never correctly defined bitcoin as a currency or commodity. Regardless, the Bangladeshi authorities are adamant to stop the use of bitcoin and had issued warnings and even made arrests in relation to bitcoin trading and selling.
As we near the 50th anniversary of Bangladesh’ independence and continue our transition into the digital era, I think the country should reconsider how digital currencies can be more beneficial. Our closest neighbour, India has recently legalised buying and trading of cryptocurrencies. In March 2020, after a historic verdict by the Supreme Court of India, cryptocurrencies were made legal and a previous ban imposed by the Reserve Bank of India was overruled. The way legalisation can be done can vary, but for now let me discuss why cryptocurrency adoption is helpful.
As a resident of Canada, I rarely visit the bank. Most of my banking needs are fulfilled online via a smartphone or computer. As Covid-19 took the world by storm, a strange incident shocked me and many others. While Bangladesh was on lockdown, thousands of RMG workers walked to the capital city and nearby districts from faraway destinations. The primary reason for their arrival was the collection of their salaries in person. Half of the country still does not have a bank account and many of these people still carry out their day-to-day spending in the form of cash. This is one of the core issues that digital currency can solve.
Over the last decade, there has been a significant increase in the number of private banks in Bangladesh. But despite the large increase, the percentage of the unbanked population remains high. Moreover, with several private banks having ever-increasingly large amounts of default loans and scandals, the general people by and large are sceptical of the banking system. Furthermore, the DSEX (Dhaka Stock Exchange Index) has gone from its peak of 8830 points in 2011 to about 4000 points at the present day. Looking in particular to the financial sector, the value is one-fourth of the 2011 peak.
The citizens can utilise Digital Taka via a simple application, website, or text messaging.
The market capitalisation of all cryptocurrencies is about USD 274 billion, or about the same as Bangladesh’s GDP of 2018. Legalising cryptocurrencies provides the public with an opportunity to invest in a truly global market and at the same time create an ecosystem of decentralised finance companies to start in Bangladesh.
One of the worries that the government may have is the foreign flight of local capital. The Money Laundering Prevention Act, 2012 can be a useful tool to address this concern. It can ensure compliance for bitcoin and all other cryptocurrencies through the utilisation of foreign currency limits on cryptocurrencies, similar to the limits on standard foreign currencies as the US Dollar, Euro or Pound Sterling. This can be established by government-approved cryptocurrency exchanges and having user-based quotas on National ID or passport. The government can also benefit from the large sum of capital tax gains this opportunity provides. After all, bitcoin is considered by many experts as the best performing asset class of the last decade.
These are just some of the many ways that digital currencies can revolutionise the archaic financial system we continue to rely on. A form of acceptance for the digital currency world can help us stay on the path of a truly Digital Bangladesh.
Tamim Sujat is an electrical engineer based in Toronto, Canada.