By John Drachman
If India’s policymakers opt for a digital currency pegged to the Rupee this year, can a U.S. Treasury-based digital dollar be far behind?
Following a proposal to prohibit what it calls “all private cryptocurrencies in India,” the leaders of the world’s largest democracy are brainstorming a framework for launching an official digital coin issued by the Reserve Bank of India. If that proposal becomes law, holders of Bitcoin, Ethereum and other popular cryptocurrencies will be told to empty their accounts in six months or face stiff penalties.
India would then be the first major economy to criminalize holding cryptocurrency. Even China, which has banned mining and trading, does not penalize possession. Meanwhile, the world’s biggest cryptocurrency, Bitcoin, hit a record high on April 12, nearly doubling in price since the beginning of the year.
Back in the USA
As far as crafting a Treasury-minted digital dollar, Uncle Sam too has been looking at crypto ideas since last summer. That’s when The National Science Foundation first awarded $225,000 to KRNC, a blockchain startup that’s focused on developing crypto features for what might be the currency safety standard of the world – U.S. dollars.
KRNC’s methodology will allow users to make purchases with their digitally linked fiat dollars without having to actually purchase Bitcoin or Ethereum. “KRNC takes the positives of Bitcoin and adds them to money the public already owns,” says Clint Ehrlich, KRNC’s chief scientist. “It’s the virtual equivalent of taping gold to everyone’s dollar bills.”
Under the new NSF-funded research, Mr. Ehrlich continued, scientists will work on a crypto protocol called Key Retroactivity Network Consensus (KRNC). “It essentially allocates a form of cryptocurrency, like Bitcoin, to fiat dollars. As part of their test now underway, researchers will distribute KRNC free of charge, so subjects can interact with the hybrid money in proportion to their existing wealth.”
The larger question
Most crypto investors though have more immediate concerns over regulatory moves concerning cryptocurrencies worldwide: the outsized impact such news has on cryptocurrency prices. Fortunately, a new white paper helps explains the consequences of such messaging on price trends. The Dallas Federal Reserve took a deep data dive to track crypto price volatility swings based on historical market reactions to regulatory news. The paper concluded that investors generally like the idea of a regulated crypto market. “News pointing to the establishment of specific legal frameworks tailored to cryptocurrencies and initial coin offerings coincides with strong market gains,” according to the paper’s authors.
The bottom line
Whether you favor digital currencies for investment purposes or for online transactions, crafting and managing your financial strategies should always take place outside of the 24/7 news cycle – whether the subject is crypto or anything else. Chances for investment success can be improved as well by finding the perfect financial advisor, a proven professional who can help grow your investment portfolio either digitally or one real investment dollar at a time.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.