SET says crypto may replace money, but many more issues need to be addressed

In financial circles, many people believe that cryptocurrency can replace traditional money. Stock Exchange of Thailand (SET) President Kesara Manchusree shared the exchange’s current thinking on this topic.

Khun Kesara said that if cryptocurrencies are to replace cash, it must have at least four properties. First, the value must be stable. Cryptocurrencies are currently volatile and if they are to replace cash, people cannot be confident that tomorrow they will have their original value or zero. We don’t know who is holding cryptocurrencies; because big players issuing the currency might hold 50%, they can manipulate the price.

The second property is that the parties ensuring stability in capital markets are central banks around the world. They will not allow inflation of 100-200%. If cryptocurrencies are to replace money, central banks will have to intervene and manage their stability.

The next problem is that they have to be widely accepted. Even today, there are only a few stores that accept payment in cryptocurrency while the new technology is not yet comprehensive. For instance, merely confirming a sale transaction requires confirmation in the entire system. If the cryptocurrency in your pocket is one system and is used to make payment in another system, sometimes a fee of 5-7% is deducted as there is no medium exchange. Even credit card fees of 2-3% are unsatisfactory to the general public.

The last matter is no supervision of a backup system. On the contrary, if we use an online payment system like PromptPay, if anything happens, there are backup systems to ensure that transactions are successful.

However, we cannot deny that technology has wrought changes, and created many products and services to meet customers’ needs. As the technology becomes more completely developed, it will be more widely available as a financial service to a greater number of people with lower costs and promises of quicker transactions.

In the past, the SET has used its high frequency trading (HFT) system to help people make transactions in real time, rapidly sending in high volumes of buy and sell orders for shares. The SET has also created its LiVE Platform for startups to access capital more easily with blockchain technology enabling fast transactions. The list of shareholders can be instantly inspected without having to wait for the book closing.

At present, securities and fund management companies are using artificial intelligence (AI) to make decisions instead of humans with the use of Big Data, so investors benefit from AI in terms of more convenience.

Raising capital as cryptocurrencies is already occurring. Last year, startups started raising capital by issuing tokens or ICOs, as they can raise capital quickly and with low costs. But statistics find that the opportunity to raise capital successfully is only 3.8%, while there are other diverse sources of capital such as personal capital, bank loans, private equity, joint venture money from VCs and IPOs.

Once the dependent laws from the Digital Securities Enactment are announced, issuing ICOs will be clearer. Risk will be reduced and investors will be looked after. At present, the SET, which is under the regulation of the Securities Exchange Commission (SEC), has to study all this closely.

It is recommended that entrepreneurs study the pros and cons of each category of capital and choose appropriately. For instance, a bank loan has low interest, but requires an asset as collateral. Raising capital through an IPO gives credibility but requires following regulations and transparency of information.