A new paper from the Bank for International Settlements proposes the creation of a unified ledger and the tokenisation of everything. If it is successful, this could represent the most fundamental re-imagining of the banking system since the Medicis.
Cryptocurrency regulation has, so far, focussed on been on the mitigating the risk to speculative investors. But there is a far more important innovation that is embeded into the architecture and design of modern crypto currency. This is what regulators should be looking to better understand.
Worldcoin has been designed to address the concern that in a world saturated with artificial intelligence we are going to need a proof of humanness. As true as that might be, I believe we need to go much further. And also tackle truth in content.
Central Bank Digital Currencies (CBDCs) and the tokenization of private money deposits could revolutionize the financial system. Agustin Carstens suggests a unified digital ledger for both public and private digital money, enabling efficiencies like smart contracts and instant settlements. This approach could extend to tokenizing various assets, transforming governance by embedding compliance within transactions.
We need to think about creating “sufficiently decentralized” social networks. While decentralization offers more control to users, it has drawbacks - such as non-unique usernames across the network. If we can use smart contracts to create a decentralized name registry we might be able to balance user control and functionality, and create a more user-empowered internet.
We need to understand how Central Bank Digital Currencies (CBDCs) fit into the modern 2-tiered banking system. While CBDCs offer potential benefits, such as banking the unbanked, do we even need a CBDC in the Indian context.
There has been an evolution of ownership from physical objects to digital assets - despite the limitations of digital ownership. Flow, a new blockchain technology, and Cadence, a programming language, together may enable true ownership of digital assets, in a way that mirrors physical ownership.
Cryptocurrency regulation will have to address a number of issues. To address the fact that cryptocurrencies provide anonymity, regulations can ensure that crypto exchanges conduct customer verification checks and be trained on anti-money laundering. The exchanges themselves can be required to be registered in India to fall within the ambit of Indian law. To address taxation concerns, our laws can be amended to base the tax payable on the fair market value of cryptocurrency as on the date of payment or receipt. Any offers of cryptocurrency can be required to comply with disclosure requirements for investor protection. All this can be achieved by amending existing laws and does not need a new regulation.
The cutting edge of innovation in NFTs is taking place in the gaming space. Most NFT based games use non-fungible tokens to attest the title of in-game digital assets. If we start to use the metaverse for more and more real world activities, we will need some way to assert title over digital assets. NFT’s could become the future of title in the metaverse.
NFTs are digital tokens that represent ownership in an underlying asset. At present they are a means by which to monetise digital art but eventually they will become the digital bridge that various commercial applications need for monetisation.
