Cryptocurrency: a new financial paradigm / Dr. Dahlia Ibrahim and Dr. Zuraidah Mohamed Isa

As we reach into a more advanced financial technology, the word cryptocurrency is not new to some of us. It is often mentioned in the news platform, either it is in a form of printed or online news. The first ever cryptocurrency offered to the financial market is Bitcoin (BTC). When it was first introduced, many people were sceptical about it. Majority of the public think that BTC is a scam and bogus investment scheme. Bank Negara Malaysia, initially did not recognize it as a legal tender and did not regulate its operation in Malaysia. BNM even issues warnings to the public not to engage in any cryptocurrency activities. As BTC’s performance escalated from a very minimal price of less than USD1 in 2009 to a time high price of over USD65,000 in November 2021 (De Best, 2023), it gained a lot of attention from the public. Pushing away BNM’s warnings, many think that cryptocurrency can replace the conventional financial system. Nowadays, cryptocurrency is money of the future, where most acknowledge it as an important digital ownership. Even BNM now allows BTC activities through its approved platform, such as LUNO, TOKENIZE and SINEGI. This article serves as an eye opener to the public by getting into cryptocurrency’s definition, how it works and its benefits. Cryptocurrency is an independent digital payment system that does not deal with financial intermediaries, such as banks, to validate transactions; meaning it is applying a decentralized system. No government or central authority can manipulate and interfere in its activities, which makes cryptocurrencies a new paradigm of the financial system. Most interestingly, cryptocurrency is a digital entry that will diminish the usage of physical money. Its peer-to-peer system allows the sending and receiving of payments anywhere in the world. Cryptocurrency transactions are recorded in a public ledger known as a block chain, a form of distributed ledger involving a network of computers or nodes (Hyson & Ancrum, 2023). Whereas, investors store their cryptocurrencies in a wallet called crypto wallet. A crypto wallet is defined as a software or hardware that allows individuals to have a visual check of how many cryptocurrencies they are holding. For fiat currency, bank accounts are the place for individuals to keep their physical money and do transactions. But for cryptocurrencies, the crypto wallet is a platform for sending and receiving cryptocurrency transactions (What is cryptocurrency and how does it work?, 2023). To prove ownership and access to the crypto wallet, private keys are required. If individuals lost their private keys, there will be no way the data in the crypto wallet can be retrieved. As such, it is important to keep the private keys safe. There are three common crypto wallets; hot, cold and custodial wallets, as depicted in Table 1.