Western Union, the American financial services giant, recently stated that they are ready to adopt cryptocurrency as a way of exchanging assets between people and the country. However, the company said that there are three variables which are yet to be met by digital currencies before it can start processing cryptocurrency transfers. These three variables are volatility, compliance and governance.
Odilon Almeida, the President of Western Union Global Money Transfer published a video on Western Union’s official website saying that the company was ready to adopt cryptocurrency as it already accepts over 130 other currencies. The sentiments echoed by Almeida in June 2018, resonate with those of Hikmet Ersek, Western Union’s Chief Executive Officer, who stated that the company is ready to adopt the digital currency, but only if it gains traction among users.
The first variable that Odilon touched on is volatility. For those who have been tracking cryptocurrencies, especially the major ones such as Bitcoin, it’s easy to see why volatility is a big issue for financial services giants. Digital currencies (at this point) unlike conventional currencies, experience huge surges and also steep downward spirals. As such, this presents a lot of challenges for any company that deals with the currency, hence the reservation by Almeida. Therefore, once cryptocurrency manages to stabilize over a long period of time, then Western Union is ready to consider processing cryptocurrency transfers.
For many, the decentralized nature of cryptocurrency makes it a good proposition. However, for financial services firms such as Western Union, this presents a myriad of challenges. Most notably, the lack of a central authority means financial firms won’t have a place to report when sinister activity is noticed. While they can block any suspicious transactions, they cannot recover or get any compensation when they fail to detect suspicious activity promptly. In addition to this, the decentralized nature of cryptocurrency presents problems when it comes to tax payments and tax enforcement.
Trust is an important element when it comes to any form of money. Currency trust emanates from the central authority i.e. the governing authority that is responsible for providing the money to users as well as regulating the use of the money. Unfortunately, when it comes to cryptocurrency, there is no such central authority hence there is no trust. It is for this reason as to why Western Union is calling proper cryptocurrency governance so that it can trust the currency before it adopts it.
In his closing remarks, Almeida said that in the field of cryptocurrency and blockchain, Western Union has partnered with Ripple Labs to carry out tests to see if blockchain tests are less expensive and faster.
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