Jenny Goh

Jenny Goh


Everyone has heard of Blockchain.

Blockchain is a type of distributed ledger of transactions across a peer-to-peer network.

And cryptocurrencies — Bitcoin, Ripple, DogeCoin (Yes, Elon Musk), Tether, Litecoin — are run by the Blockchain technology.

In 2016, the whole cryptocurrency market was valued at US$9 billion.

Today, the cryptocurrency market is worth US$1.4 trillion.

The amount of cryptocurrency traded daily? US$13 billion.

This is massive volume for something that started only recently.

To put things in perspective, the total value of stocks listed on the New York Stock Exchange is US$24.4 trillion. With a daily traded value of S$169 Billion.

Before I share what is cryptocurrency, I’ll explain first about the concept of money.

The concept of money and cryptocurrency

Money has value because someone is willing to accept it as a medium of exchange when they are buying and selling stuff.

Money is a fiat currency.

And a fiat currency is “legal tender”.

This means a currency is backed by the full faith and credit of the government.

For example, you use the Singapore Dollars to buy your daily essentials. And it’s because our Singapore government says it’s legitimate.

Today, money is simply recorded on a ledger, a number on the bank’s books.

Now, cryptocurrency, is not backed by the government, or anything.

But people think its valuable because people simply believed in it.

Cryptocurrency is one type of digital currency.

But the difference between cryptocurrency and other types of digital currency is that cryptocurrency is secured by cryptography.

You see, cryptography is a technology used to secure information.

And this makes it hard for a fake cryptocurrency to be produced.

Different cryptocurrencies use different cryptography technology. And thus cryptocurrencies have different governance systems.

These systems affect their underlying value.

And with market cycle and economics, it makes it hard for interested parties to evaluate cryptocurrencies’ true worth.

What’s the big deal with cryptocurrency?

If cryptocurrency is not backed by anything, why would people want to use it?

The thing is, one of the biggest value propositions for cryptocurrency is it removes the middle person— People can transact directly with one another.

When you make an online payment, there’s typically a middle person — a bank — that processes the payment. The middle man takes a fee.

But with cryptocurrency, you perform transactions without the middle person.

This reduces the cost of doing business. Makes it easier for consumers too.

And that’s what’s happening today. 

You can send cryptocurrency to your friend without going through anyone.

For instance, you wish to send cryptocurrency ABC to your friend in another country.

When you send money to your friend, you typically go through a money changer, or via online platforms such as Transferwise and Revolut.

But, with cryptocurrency, you send the money directly to your friend as long as they have a “crypto wallet address”.

Imagine this: Using cryptocurrency is like sending a postcard straight to your friend’s home address.

Without ever going through a post office.

Here’s the other thing.

Cryptocurrency provides millions of people with mobile internet access but no bank accounts or traditional systems of banking. giving these people access to some form of money or value.

In other words, these people now have access to credit. They can easily borrow money or use money to do many things, including getting a house.

Essentially, cryptocurrency helps some people to move one step closer to financial inclusion.

The last, and probably more ‘contentious’ benefit is privacy.

At its infancy, cryptocurrencies’ nature is pseudonymity — people can hide behind fake names.

This is dangerous to some people who live in authoritarian states where their identities are at risk of getting exposed.

As the world progress, there is now a subset of cryptocurrencies that provide complete anonymity.

And this comes at a price as it facilitates money laundering or terrorism funding.

This is especially prevalent in certain countries which are experiencing a lot of political instability.

The next question then is, what is Bitcoin, and how is it different from all the other cryptocurrencies?

I’ll share more with you soon

Any questions? Feel free to drop me a comment below.

Fun fact: There are cryptocurrencies created just for fun or as a meme. You might have heard of the (in)famous Dogecoin which got Elon Musk all excited!

Jenny Goh

Notify of
Newest Most Voted
Inline Feedbacks
View all comments
Eric Khoo
Eric Khoo
9 months ago

Why do govts and banks so strongly oppose cryptocurrency if not for the loss of revenue and control over others.

Jenny Goh
Jenny Goh
9 months ago
Reply to  Eric Khoo

Hi Eric, thanks for the question.
Let me attempt to answer the question from a few perspectives:

  • It is not so much of for fear of losing money/revenue. See, government makes money by a few avenues, which include collecting tax from us. If government recognises cryptocurrencies, you can still use cryptocurrencies to pay tax. But if they do not recognise cryptocurrencies, you will need to use cash/bank deposits to pay.
  • Loss of control – very likely. Cryptocurrencies do pose a threat in many countries, maybe not Singapore, but in countries where their currencies are not stable, cryptocurrencies serve as an additional alternative form of money to them. Then there is the fear that this cryptocurrency will replace the native currency. This is not just a matter of losing control, but it can upset the economic stability of said country and can have potential political implications too.
  • Central banks also have the mandate to control and manage the flow of money, aka monetary police. Therefore, central banks would want to make sure they have some kind of oversight (although most centrals bank don’t have it now) on cryptocurrencies. MAS and HKMA are taking a more open approach, while a lot of other central banks are taking a more hard-lined approach (such as China and Korea). On top of that, you might have read in the news that a lot of central banks are also looking into what’s called Central Bank Digital Currency (CBDC). At some point in the series of newsletters, I should be able to touch on more about that.
  • For banks, you would notice that some of them have jumped on the bandwagon of looking into cryptocurrencies, or the blockchain technology (or distributed ledger technology). They understand that this is a trend. Most of them are working more on application of blockchain, for the purpose of capturing more market share and reduce cost, less so around cryptocurrencies yet. Although there are firms (financial services providers) that have started offering crypto-funds as investment products to their clients. This, includes, Cathie Wood’s upcoming bitcoin ETF.
  • The inherent nature of cryptocurrencies means that it is easy for cryptocurrencies to be exploited by others to conduct illegal activities, as an example, cryptocurrencies are frequently used for payment in the dark web

Hope this helps.

wf Teng
wf Teng
9 months ago

Hi Jenny,
1. What will happen to the existing cryptocurrencies when CBDCs around the world start to be used more openly?
2.Will CBDC able to replace fiat currencies?
3.Will CBDC tight to any asset classes to holds it value and reduce volatility?

Jenny Goh
Jenny Goh
9 months ago
Reply to  wf Teng

Hi Teng,
Great questions you have there. After a couple of articles I will definitely share a few things about CBDCs, but for now, here’s what I think:

  1. I don’t think cryptocurrencies (“crypto”) are going to disappear anytime soon, unless governments and central banks in the world decide to pass some bill/law to stop them. CBDCs and crypto are quite different in that CBDCs are backed by central banks and cryptos are not. This also means that central banks will get to manage how many CBDCs can general public/banks hold, as it affects the stability of the nation’s currency (CBDC is the digital form of the nation’s currency). On the other hand, crypto, there is no limit to how many crypto you can hold (interestingly Bitcoin does have a limited supply). Therefore, one can think of crypto as an easy access to a form of money. As I said, anything can be accepted as money as long as someone accepts it as a medium of exchange, a unit of account and a store of value. That’s why people used gold, rai stones (check out Yap Island), among other things, as a form of money. There will still be demand for cryptocurrency, also because opening an account with a bank, or a central bank may require some form of identification which some people in other parts of the world do not have; some people for some reason do not want money to be traced (CBDCs can potentially be traced) and etc.
  2. CBDC is digital form of fiat. It is not there to replace fiat currencies. It might change the way central banks manage cash in circulation and commercial bank money, among other things. But it is not issued to replace fiat currencies. Just to make sure we understand, our money that sits in the bank is bank deposits, the physical paper money is cash.
  3. As CBDC is fiat, the value and volatility in this case is tied in to the value of the nation’s currency. For example, the e-SGD value will be the same as SGD. One can’t say that the e-SGD = 1.5x SGD or something around those lines.

CBDC is a highly interesting but complex topic too. But we will take it step by step!

Would love your thoughts, please comment.x