Mariyam Qazafi

393486
Economics 21
Section B

Monetary Policy
Are Digital Currencies money? Do they have a legal vendor?

Money can be exchanged for goods and services, while crypto is more often an investment.
Mainstream banks reflect this. Many are moving away from the term cryptocurrency in
favour of cryptoassets, to make the distinction between money and crypto.

Digital currency refers to any means of payment that exists in purely physical form.
It is not physically tangible like the dollar and is transferred using online systems.
Digital currency can not be considered as money because it does not have any legal tender
status in any jurisdiction as stated by the US Department of Treasury.
Moreover, it is not generally accepted and as of right now, it can’t be used as a measure of
value.

Reference:
https://www.investopedia.com/terms/d/digital-money.asp#:~:text=Digital%20money
%20(or%20digital%20currency,money%20is%20the%20cryptocurrency%20Bitcoin.

Are Digital Currencies Legal?

The legality of digital currencies varies by country. in many developed countries, digital
currencies are legal and regulated while in others they are restricted. Unregulated virtual
currencies do not offer legal recourses to investors because they are issued by private
entities and, for the most part, are not regulated by financial authorities. Virtual currencies
traded on exchanges, such as cryptocurrencies, can be subject to highly volatile price
swings.
The legal status in Pakistan is uncertain and there have been reports of regulatory
authorities taking a cautious approach. In 2018, SBP issued a circular that banned financial
institutions from providing services related to cryptocurrencies. However, cryptocurrency
regulations are expected to change over time.

Reference:
https://www.investopedia.com/terms/v/virtual-currency.asp#:~:text=Unregulated
%20virtual%20currencies%20do%20not,to%20highly%20volatile%20price%20swings.

Are digital currencies halal or haram?

The Islamic Money Master accepts that digital currency is Sharia-consistent, on a
fundamental level. As indicated by the Shariah strategy they view crypto as genuine money
or as a computerized resource. They likewise suggest that Muslim crypto brokers check each
crypto buy or venture independently to conclude whether it's halal or haram.
Furthermore, digital money doesn't create revenue or riba which is haram. So it very well
may be less questionable than crediting cash at exorbitant financing costs to create a gain.
Purchasing digital currency is maybe generally like purchasing stocks and offers, just with a
lot more elevated levels of chance and vulnerability. This gamble, alongside an absence of
guidelines, can make digital money haram.
Eventually, whether crypto is halal or haram really depends on how you use it. Assuming
you're utilizing it to purchase permitted merchandise, and not getting it with the
expectation that the worth will go up, this might be allowable.

However, on the flip side, Islamic researcher, Dr. Anas Amatayakul, prompts Muslims to try
not to purchase or exchange digital currency "for the present." This leaves space for
additional advancement in digital currency for Muslims — better guidelines and less
unpredictability might make crypto more admissible.

Reference:
https://bloommoney.co/learning-hub/is-bitcoin-halal-a-guide-to-cryptocurrency-for-
muslims

Digital Currencies are the future currency. Do you agree?

Digital currency has the potential to completely change how society thinks about money.
The rise of Bitcoin (BTC), Ethereum (ETH), and thousands of other cryptocurrencies that
exist only in electronic form has led global central banks to research how national digital
currencies might work.
Cash is the physical form of fiat money, and cash transactions have been on the decline for
some time it’s possible that cash use will continue to drop, and something will replace it.
Currently, debit and credit cards have replaced most cash transactions.
However, Probably the number one reason cryptocurrency has not replaced fiat currency as
our modern money is cryptocurrency's penchant for volatility.
Nations of the world would much rather have a stable currency - a sign of a healthy
economy - rather than a currency that goes up and down constantly.

Reference:
https://www.ibm.com/blog/the-future-of-digital-money/
Is it possible to control the supply of Digital Currencies? What was the value of Digital
Currency in 2008 vs 2018?

The authority over the value, supply, and circulation of money holds significant sway in
shaping economic systems and the path of nations. Central banks and governments play a
pivotal role in managing currency, enabling them to shape economic policies, control
interest rates, and ensure macroeconomic stability. This control directly influences trade,
investments, and overall national prosperity. However, the emergence of private digital
currencies poses a potential challenge to this control, introducing new dynamics and
possibilities that could disrupt the established order.

Governments are closely observing the increasing popularity of digital currencies, driven by
concerns about maintaining financial stability and safeguarding consumer interests. The
emergence of private digital currencies poses a challenge to central banks and governments,
as it becomes possible for citizens to opt for alternative currencies beyond their control,
undermining the extent of control that central banks and governments can exert on the
financial system. Moreover, the role and relevance of central banks and governments in
shaping monetary policy may be questioned if they lose the ability to exercise control over
the currency preferences of their citizens.

Bitcoin had a price of zero when it was introduced in 2009. On July 17, 2010, its price
jumped to $.09. Bitcoin's price rose again on April 13, 2011, from $1 to a peak of $29.60 by
June 7, 2011, a gain of 2,960% within three months.

A sharp recession in cryptocurrency markets followed, and Bitcoin's price bottomed out at
$2.05 by mid-November. The following year, its price rose from $4.85 on May 9 to $13.50 by
Aug. 15.

Bitcoin's price moved sideways in 2018 and 2019, with small bursts of activity. For example,
there was a resurgence in price and trading volume in June 2019, with the price surpassing
$10,000. However, it fell to $6,635.84 by mid-December.

Reference:
https://www.orfonline.org/expert-speak/digital-tug-of-war-the-battle-for-monetary-
control/

https://www.investopedia.com/articles/forex/121815/bitcoins-price-history.asp