Cryptocurrency as a Good Investment: Fairy tale or soon to be reality?

The FSCA is planning to unveil a regulatory framework covering cryptocurrencies early this year to help protect members of the public from risky financial products. Does this mean society is finally accepting cryptocurrency as a good financial product?

But firstly, What is cryptocurrency?

According to Investopedia, a cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, making them theoretically immune to government interference or manipulation.

In simple terms, cryptocurrency is an unregulated digital currency used as a form of exchange and/or for speculation. Can we introduce cryptocurrency as one of the traditional financial products?

Cryptocurrencies have a high potential for growth, greater liquidity, and are good for international transactions. The downside is that they are highly volatile, currently unregulated, and more susceptible to cyber hacking. From this, we can establish that cryptocurrency is a high-risk investment. Traditional financial products are financial products such as stocks, bonds, real estate, and cash. They are regulated, simple to understand, and are also considered safe investments suitable for the public. Therefore, in my opinion, cryptocurrency will not be regarded as a traditional investment any time soon.

Will asset/wealth managers ever consider cryptocurrency as part of their asset allocation? We will never know, but with new regulations underway, it is important to acknowledge the impact cryptocurrency will have on the financial services industry... It is now about time we consider cryptocurrency as an alternative investment to more traditional investments.