The popularity of investing in cryptocurrencies, of which the most popular is Bitcoin, is an undeniable fact; however, there are certain limitations that must be considered before deciding to buy such assets.
A little history
Although the concept of cryptocurrency was used for the first time since 1998, the first virtual asset of this type was created up to 10 years later and entered circulation in 2009. This digital currency called Bitcoin began under the idea of being decentralized, that is, that It does not depend on or is supported by a central authority (which may be the government of a country or a bank), but is maintained by the network of users and regulated by supply and demand.
To ensure that all transactions were respected and integrity was maintained in the user network, these cryptocurrencies were created to use Blockchain technology, which is nothing more than a chain of accounting records that are updated every so often so that any of the Users (the nodes of the network) can access them and validate the transfers made by any member of the network. Also, the system automatically sends the updated version to every node on the network so that they all have the same records.
Some users with the necessary knowledge to validate the movements in the network, better known as miners, receive an automatic payment for solving any problem that may arise within it, functioning as an incentive for the honesty and protection of the information chain of the network’s digital currency. In theory, this is what the security of the cryptocurrency would bring about.
So if it is such a secure medium, why does it face so much rejection from financial and government authorities?
Why receive the support of a financial institution?
The main criticism against investing in cryptocurrencies like Bitcoin and its digital counterparts is their volatility. Being regulated by supply and demand, any external circumstance that causes its users to stop considering it as a safe option causes its value to fall in the market; In this way, digital currencies that at one moment were priced in millions of dollars, the next could lose all their value, something that happened to Bitcoin itself in May of this year when its value went from more than 63 thousand dollars to less than 50 thousand in just 10 days.
What caused this considerable loss in value and what did it represent for its users?
This event was the result of a decision that the billionaire Elon Musk made about his company: after showing himself as a great supporter of investing in cryptocurrencies, he withdrew his policy of accepting Bitcoins as a means of payment on his Tesla vehicle this because, according to him, mining the cryptocurrency produces a large amount of pollution from the consumption of fossil fuels.
When an influential personality like Musk changed his mind about digital currency, the whole world followed in his footsteps, causing them to stop “consuming” the currency; something very similar to what happened to Coca-Cola after Cristiano Ronaldo said not to give him the carbonated drink in the middle of a press conference, causing the shares of the soft drink to fall quickly minutes after the event was televised.
Regardless of Musk’s statements, we must understand that Tesla Motors, as a company, cannot afford to accept digital currency as payment for its vehicles precisely because of its volatility. If their price fell again, the Bitcoins they would have accepted as payment would barely cover a fraction of the total cost of the vehicle, causing losses for the organization.
In the case of the currencies of the countries, although we know that they have a certain volatility (causing the peso to cost less or more dollars one day, for example), these ups and downs are backed by financial institutions that undertake to cover the missing cost in case of losses in the value of the currency that they support.
For example, if the peso were to be worth 10 dollars more than its current value, the Bank of Mexico would be in charge of backing our currency with the missing dollars for any payment that any Mexican made and that is something that our national bank can only make if it has enough assets to cover this debt, something that digital currencies cannot do due to their characteristics of collective use and management; that is, no one is responsible or has an obligation to pay Tesla the rest of the value of its vehicles.
This snowball is what causes those who want to invest in cryptocurrencies by buying and selling Bitcoins or similar (through purchases from digital wallet providers or by accepting them as a payment method), risk large losses of their capital in any time depending on the market.
Current situation of digital currencies in Mexico
Nowadays, everything indicates a change in the way we do transactions: online purchases add more followers every day and the use of paper as currency is less every day; however, it does not imply that this will occur in the near future. Just as the plastic of bank cards coexists with cash, cryptocurrencies will surely be used on a par with other electronic payment methods such as transfers or the use of PayPal.
With those circumstances in mind, many countries are already working on comprehensive solutions that strengthen their currencies while creating options for their citizens to follow the digital path that the entire world is taking. As an example, China is one of the powers that is already working to have its own cryptocurrency.
On the other hand, other countries with less economic capacity found that investing in cryptocurrencies was a positive alternative when using them as a payment method, as is the case of Venezuela, which has seen digital currency as a refuge for its transactions in the midst of its economic crisis due to the great devaluation facing its own national currency. Or El Salvador that this past June 9, 2021 became the first country in the world to recognize Bitcoin as a legal tender in its country, leaving it free of taxes on capital gains like any other legal tender in its country. .
In the case of Mexico, this type of authorization does not yet exist to accept Bitcoins as currency. This means that no financial institution is authorized to celebrate or offer to the public operations with virtual assets, be it Bitcoin or any other cryptocurrency. This responds to an internal need to have control regarding the transactions carried out by anyone who wishes to do business in our country and ensuring the payment of taxes.
Conclusions
Although it is not legal to accept cryptocurrencies as payment in our country, as it is a digital asset accepted in other countries, it is possible to invest in cryptocurrencies and use them to buy from foreign companies whose countries allow them to accept them as a payment method. However, the social and legal events of our country must be considered to have legal certainty that we are not committing a crime or that we are endangering the economic patrimony of our family.
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