Newsletter No. 537

04 # 5 3 7 | 0 4 . 0 5 . 2 0 1 9 W hile the 2008 financial crisis shook the global economy, a reclusive cryptographer going by the pseudonym Satoshi Nakamoto invented bitcoin. Dissatisfied with the conventional financial system, he created this electronic version of cash that allows people to transact without interference from banks and governments. The idea took off. In the last few years, cryptocurrency has been making headlines, with thousands of kinds of digital coins attracting attention from speculators. Bitcoin, the first and still the most popular cryptocurrency, saw its price rise from US$900 in December 2016 to almost $20,000 a year later, before falling back to about $5,000 in April 2019. Is cryptocurrency the future of money, or just a risky bet? Associate Professor of Practice in Finance Chew Seen-meng weighs in. Chips off the Block Blockchain is the underlying technology of cryptocurrencies. While one may need a computer science degree to fully understand its workings, Professor Chew offered a simple analogy to it: ‘Just think of blockchain as an advanced database management system, like a giant Excel spreadsheet, which can manage, record and encrypt all transaction data efficiently and securely.’ In other words, cryptocurrency like bitcoin uses the blockchain technology as its transaction ledger. Instead of having a trusted central authority, e.g., a central bank, that keeps track of financial transactions, the blockchain technology uses cryptography to remove the middleman and achieve peer-to-peer transactions. This is particularly useful in financial areas that require fast, accurate and secure records. In trade finance, for example, blockchain can simplify complex documentation and reduce the number of parties involved in cross-border selling and buying, streamlining payment processes and lowering transaction costs. Blockchain technology is also immutable and verifiable. Transactions become permanent record and cannot be altered once written. Every record can be viewed by any participant, allowing everyone to verify the authenticity of each transaction. By inhibiting data tampering, the system facilitates audit processes and enhances the security of transactions. The Other Sides of the Coin Although the design of cryptocurrency is safe by default, drawbacks remain. Like gold, many cryptocurrencies are in limited supply. For bitcoin, the supply is capped at 21 million units, which can be problematic for the monetary system. ‘Money demand expands in tandem with economic growth, but if money supply is fixed, interest rates could be driven too high, resulting in structural deflation, similar to the gold standard,’ explained Professor Chew. The anonymous nature of cryptocurrency transactions is another concern. The ability to conceal the origin and destination of fund transfers makes cryptocurrencies highly attractive for money launderers and terrorists to use for illegal transactions. Similarly, since users’ identities need not be disclosed in these virtual transactions, people could use them to make cross-border payments for the purpose of evading taxes. Expert Advice In the course ‘Current Developments in FinTech’ he teaches at the Faculty of Business Administration, Professor Chew, who was an economist at J.P. Morgan and International Monetary Fund, uses case studies to show his students how cryptocurrency and blockchain have been used by companies to do business. He also shows them economic models that have been developed to predict the elusive value of bitcoin. However, splashing out on the volatile e-currency is not something he encourages. ‘At this point it is still a highly speculative kind of investment, a playground for the rich. To ordinary people, I would say don’t burn away your savings investing in cryptocurrency unless you have a full understanding of what it is and what you are getting into. ‘Having said that, it’s good to learn about bitcoin, even if you are not going to invest in it, because digital currency could become an important part of our lives in 10 or 20 years’ time if the blockchain technology becomes more mature and gains a much wider user adoption,’ said Professor Chew. Cryptocurrency is still in its infancy. Time will show whether it will cause a revolution in the financial system or turn out to be just another speculative mania like the dot-com bubble. The only thing we can tell for sure is that our reality will never be the same again. Christine N. 2 008年，金融海嘯席捲全球經濟之際，一位隱世密碼學家托名「中本聰」， 發明了比特幣。此君對傳統金融制度不滿，遂創造了這種電子加密貨幣， 讓人們可以繞過銀行及政府進行交易。他的構想猶如一顆重磅炸彈，網上 網下，激起千重浪。 過去數年，加密貨幣多次成為媒體焦點，其種類數以千計，引來投機者虎視眈 眈。最先面世的比特幣至今仍是最受歡迎的加密貨幣，價格由2016年12月每枚 九百美元，短短一年間飆升至近二萬美元，直至2019年4月才回落至五千美元。 加密貨幣是貨幣界明日之星，抑或是一場豪賭？且聽金融學專業應用副教授 趙善銘 一探虛實。 區塊鏈的新金融美學 區塊鏈是支撐加密貨幣的核心技術。要徹底明白區塊鏈如何運作，恐怕要修讀 計算機科學，然而趙教授在此引用了簡單的比喻解釋：「可以把區塊鏈當成一 個高級資料庫管理系統，就像巨大的Excel試算表，能快捷而穩妥地管理、紀錄 和加密交易數據。」換言之，加密貨幣如比特幣就是用區塊鏈作為交易記帳本。 傳統金融業會設一所獲各方信賴的中央機構（如中央銀行），監管所有交易； 區塊鏈則採用加密技術，撇除中介，實現點對點交易。故此，在亟需快捷、準確 而安全地紀錄數據的金融領域，區塊鏈技術正好大派用場。例如在貿易融資方 面，區塊鏈可以簡化文書紀錄，減少跨境買賣涉及的持份者數目，讓付款流程 更順暢，並降低交易手續費。 區塊鏈另一好處是不容篡改，而且易於核實。交易一經紀錄即永久保存，不可 變易，而所有參與者均可查看每項交易紀錄，驗明真偽。整個系統既方便審核， 又可避免數據遭捏造篡改，令交易更為安全。 亮麗背後的暗影 加密貨幣的設計看似滴水不漏，但也有弊端。很多加密貨幣就像黃金一樣，數量 有限，例如比特幣總數上限二千一百萬個，日後可能不敷應用，影響金融系統。 趙教授解釋：「貨幣的需求伴隨經濟增長而上升，但當貨幣供應有限，利率便會 被大幅抽高，引致結構性通縮，情況就和以黃金為本位幣的金本位制類似。」 另一隱憂是，加密貨幣以匿名方式交易，用戶可以隱藏資金的來源去向，因此易 被不法之徒和恐怖分子利用，進行洗黑錢等非法交易。同理，因用戶無需在虛 擬交易中披露身分，便能透過跨境交易，輕易逃稅。 專家忠言 曾任摩根大通和國際貨幣基金組織經濟師的趙教授，現於中大工商管理學院 講授「金融科技的最新發展」，運用個案向學生展示企業怎樣用加密貨幣和區 塊鏈營商。他也教學生利用現有的經濟模型，推測比特幣難以估算的價值。 不過，加密貨幣價格狂升暴跌，他反對投資者孤注一擲。「到目前為止，加密貨 幣仍然是極度投機的投資產品，是富人的遊樂場。一般人除非清楚知道加密貨 幣為何物，否則千萬別把儲蓄押上。 「話雖如此，即使不打算投資比特幣，認識一下也是有益無害。如果區塊鏈技 術發展成熟，獲廣泛接納，加密貨幣將在十至二十年內成為我們生活的重要部 分。」他補充。 加密貨幣仍處於襁褓階段，到底會為金融體系帶來變革，還是製造另一個科網 泡沫，尚須拭目以待。唯一可以肯定的是，世界從此不再一樣。 一幣 何止兩面 趙善銘全方位審視電子加密貨幣 A Bit Like Coins ,  A Lot Unlike Coins Chew Seen-meng puts cryptocurrency into perspective