Almost a decade ago a new sophisticated system of payment emerged as an alternative, decentralized and digital form of cash-flow that works beyond any governmental or administrative control. Many have heard little about cryptocurrency until it reached the popularity in recent years showing how much the society mistrust the bank authority. Moreover, in just a year its price on the stock market skyrocketed extending investors’ revenue by nearly $16,000 by the end of 2017. Although bitcoin is acknowledged by most of the countries in the world, it is still considered as an unreliable source and often labeled as a ‘speculative bubble’ that may burst any time once it reaches the peak point.
Due to lack of regulations and official govern in the system itself, it became a vast platform for criminal activity such as money laundering, sensitive data-flow etc. therefore a great area for generating fake news surrounding this uncharted currency exchange system. How bitcoin and fake news are related to each other and what impact they could possibly have on the economy? Questions that leave no fair answer but require a deep comprehension in the future.
To understand how cryptocurrency works a short explanation is given to ease the comprehension of the discussed topic. Bitcoin was first widely introduced to the audience when its domain name was registered as bitcoin.org and later on released as an open source software in 2009. The main role of cryptocurrency system is making transactions directly between users without intermediaries such as banks (peer-to-peer system), which is found by many, more beneficial in terms of privacy, low transaction fees, ease and fast of use. Transactions are independently verified by cryptography codes and afterward registered in a public distributed ledger (blockchain).
However, there were many concerns over the exploitation of virtual monetary value in the global trade as the system is uncontrollable, independent of authorities, regulations and possible to manipulate its value. The most well-known figure in the tech world and the principal co-founder of Microsoft, Bill Gates has stated that he does not see any good in the anonymity of transferring virtual money, he wrote:
“The main feature of cryptocurrencies is their anonymity. I don’t think this is a good thing. The Governments [sic] ability to find money laundering and tax evasion and terrorist funding is a good thing. Right now cryptocurrencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and cryptocurrencies is super risky for those who go long.”
Along with Bill Gates, many well-known economists, corporations have discouraged the use of cryptocurrency, among which is found Internet giant Google, who announced that it will restrict all the advertisements promoting virtual monetary exchange due to its highly risky financial instrument. Moreover, fake news websites along with malware contents attached to bitcoin ads have shown in the company’s annual report on ‘bad ads’. This was Google’s new approach towards eliminating misleading information by blocking thousands of suspicious websites from its search engine. Even Facebook seemed to follow the same path and start blocking ads concerning cryptocurrencies due to a similar cause. Rob Leathern, Facebook’s product management director explained:
“We want people to continue to discover and learn about new products and services through Facebook ads without fear of scams or deception, That said, there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.”
Fake news surrounding bitcoin phenomenon has deliberately affected the cryptocurrency environment itself. As an example, Reuters has published a misleading information regarding South Korea’s ban on Bitcoin which has led to mass panic reaction and rapid drop-off prices on the stock market. Rumors about the prohibition of cryptocurrency exchanges started with the announcement of the Ministry of Justice declaring his willingness to ban virtual coins which in fact turned out to be an unconfirmed proposal. The statement has immediately created a vast number of fake news surrounding South Korea’s withdrawal from virtual money transfers. What was, in reality, an intention to shut down anonymous accounts in order to get rid of money launderers and to regulate its fast-growing business in the country. The idea came from an incident when it was discovered that
“Chinese traders were laundering millions of dollars by profiting from premium rates at crypto-exchanges based in South Korea, which is quoted around 20% higher than the global average. Having this in mind, those traders brought bitcoins from China, sold them in South Korea, and send the profit back to their native country.”
Even though the government in the official statement discarded all the rumors and reaffirms the position of cryptocurrencies in an unaltered condition still it has left many investors in constant uncertainty after bitcoin’s sudden value drop-off. The example clearly shows the instant effect of fake news on bitcoin’s market despite the fact that it has been repeatedly warned by many public figures of its manipulative nature. The probable scenario for bitcoin traders in South Korea is that it will continue to operate at least in the short term because of its growing impact on the economy (South Korean’s webpage Bithumb is the second largest platform for bitcoin trading worldwide) and which is gradually overtaking the overall marketplace. Banning the cryptocurrency would meet with a huge social disapproval since it became too immense to shut it down.
To conclude, fake news can have a damaging impact on cryptocurrencies since its market highly depends on tiny bits of information provided by news, individuals’ opinions or rumors. As soon as bitcoin will be regulated by providing conventional principles of a central system that will prevent rapid value fluctuations, criminal activities and rebuild its trust, it might grow into a significant payment method in the future. Otherwise, it might remain unstable affecting inflation and economic activity. Nevertheless, cryptocurrency is becoming more popular as technology advances and so does all the dangers surrounding it. By Malgorzata Nguyen Thi Borkowska