Dr. Bahaa Helmy Writes: Bitcoin, the Electronic Currency – Its Pros and Cons

The first signs of a new revolution in the business world appeared in early 2009 with the emergence of so-called electronic currency, a virtual digital currency used for electronic exchanges and financial transactions over the World Wide Web. There are many types of these currencies, the most famous and most widely traded of which is Bitcoin, designed and launched by a Japanese programmer.

The nature of this currency can be summed up as follows: it does not carry a serial number to which it is linked; it is not backed by the state as paper currency is; it is not tied to any country or specific geographical location; it is not valued in gold or silver as paper currency is; and it is traded over the Internet, meaning that it is intangible and has no physical existence. It lies outside the control of governments and is not subject to the oversight of a central bank. It is an encrypted electronic currency that can be compared with other currencies such as the dollar and the euro, and it can be used like any other currency to make purchases online or be converted into traditional currencies through exchange. It moves from one user's account to another on the Internet, and the sale and purchase transactions in which it is used cannot be traced.

This currency is based on the principle of decentralization and has its own electronic trading rules, which are characterized by simplicity, ease and protection for its users. The currency has subunits such as 1 bitcoin, centibitcoin, millibitcoin and microbitcoin, and it can also be used to purchase medical and legal services and in some shops. The currency has spread among Internet users within a short period of time, and some websites and restaurants in several countries have begun announcing that they accept dealings in the virtual currency.

The valuation of this currency has gone through unprecedented fluctuations and surges, reaching more than ten thousand after having been worth six US cents when it was launched in 2009.

The currency's developers are active in launching new programs and plans for trading it in order to ensure its spread and popularity and to achieve large profits for its users and promoters. Among these means are controlling the maximum limit of its production or issuance, set at 21 million by the end of 2040, and launching new versions of the currency under different names such as Bitcoin Cash, Bitcoin Gold for high-value transactions, and Bitcoin Diamond — names only, without these currencies being valued in those precious metals — with the aim of developing it and finding solutions to the problems facing its users on the Internet.

As for official international recognition, Germany is the only country that has officially recognized this currency, while many countries remain wary of officially recognizing it, and others have publicly announced a ban on it, such as the United States, Russia, China, Saudi Arabia and others. This is for numerous reasons, such as its conflict with national laws; the possibility that it may lead to the flight of real capital into digital currencies in the virtual arena of the Internet; its incompatibility with the accounting systems of companies that operate on the basis of financial statements; the possibility of its being a means of money laundering, terrorist financing and organized crime; its not being subject to tax systems; as well as the absence of legislation regulating dealings in it and safeguarding the rights of its users, in addition to the exposure of the currency's value to the risk of major volatility.

In Egypt, there is no legislation or legal regulation governing the trading of digital currencies, and transfers from bank accounts to their electronic counterparts are monitored and supervised within the framework of the legal rules governing the combating of money laundering and terrorist financing.

We conclude from the above that there are two different trends. The first encourages the use of digital currencies as a new electronic monetary system that leads to the creation of a free currency in line with the liberalization of the global economy, avoids the problems of the current monetary system, dispenses with intermediaries and commissions, and keeps pace with the rapid changes in the business world, especially on the international information network. We believe that the use of Bitcoin in the hacking of computers and personal accounts and in ransom demands, specifically in the two global cyberattacks — the first ransomware virus «Wanna cry» and the second «Petya» — was a form of promoting it.

The second trend strongly opposes recognizing the trading of virtual currencies because of the concerns set out above.

We see the necessity of looking ahead to the future and of the Central Bank of Egypt undertaking a study of the future of this modern, innovative financial tool, with a view to developing a vision for legislation regulating its electronic use and setting rules for licensing, registering and enrolling the companies and websites wishing to trade it, should dealings in it be approved, in a manner that preserves the rights of those dealing in it and protects the business sector and national security.