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Bitcoins, they do not bite


by Pedro Luiz Rodrigues

Goldman Sachs in the U.S. and Brazil’s largest brokerage firm, XP Investimentos are, separately, getting prepared to launch products in Bitcoins and other crypto-coins.

It took ten years for the Bitcoins to evolve from a digital witchcraft curiosity up to the current situation of global acceptance.

Financial markets expectations regarding digital currency products  are now so broad that they cannot be ignored anymore.

It is not easy for laymen (among whom I include myself) to fully understand how crypto-coins work. Even the simplest explanation –  the one offered by Wikipedia- is hard to grasp:

Bitcoin is a worldwide cryptocurrency and digital payment system (…) The system is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain.

Central banks are attentive to the phenomenon, and do what they are supposed to do, alerting  the public that virtual currencies have no guarantee of conversion to the official currency, neither are guaranteed by real assets of any kind.

The value of a virtual asset conversion into currencies issued by monetary authorities will depend on the credibility and confidence that market agents have in such virtual currency.

There is, therefore, no governmental mechanism that guarantees the official currency value of the instruments known as virtual currencies, with all risk of their acceptance in the hands of users.

In Brazil, although the use of so-called virtual currencies has not yet been shown to pose risks to the National Financial System, particularly to retail payment transactions, the Central Bank is monitoring the evolution of the use of such instruments and discussions in international fora the matter – in particular its nature, ownership and operation – for the purpose of adopting any measures within the scope of its legal competence, as the case may be.

In the first half of this year, the Brazilian Federation of Banks (Febraban) held a seminar focusing on blockchain (the solution that made viable the existence of bitcoin), which employs cryptographic mechanisms, is perceived as the way to eliminate intermediaries and offer greater security and simplicity to digital operations.