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maltatoday WEDNESDAY 29 NOVEMBER 2017 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way Could Bitcoin be the secret to side-stepping crippling infl ation? There has recently been a lot of negative press about bitcoin. That is nothing new with an in- novative technology that takes power away from regulators and gives it back to the people. Many questions are asked about a digital currency that is, by design, not underpinned by a government-run central bank. But the question that really needs asking is this: Who or what is going to protect a hard- working Venezuelan from an inflation rate the IMF says has peaked above 700% this year? The same question goes for anyone in Argentina or perhaps Angola where inflation is 25% and 27% respectively. It may surprise many but, in the absence of official banking support, bitcoin can play a vital role in turning local currency into dollars and protecting peoples' income against rampant inflation in their domestic economy. Rise of cryptocurrency The other question that very rarely gets asked is why people are choosing to use cryptocurrencies in the first place? Often the authorities that oppose their use, will say they are unsafe or used by criminals. However, I think they need to look more at themselves. The truth is that people are using bitcoin because many have lost faith in the banking system. When you look at the fallout of the 2008 global financial crash, it's easy to see why. The banks were shown to be acting recklessly with poor regulation and the man in the street paid the price. Whether through the banking crash or the economic uncertainty that has followed in many economies, people have lost faith in the banks and the regulatory system that is supposed to keep their money safe and stable. Protecting against inflation This is felt acutely across the developing world as well as other struggling economies where inflation is rife. Hardworking people are earning a local currency which they know is worth less and less every week. It's only natural they should want to earn a stable currency to protect their income from inflation and ensure they can still feed and clothe their families. The trouble is, in many countries where the economy is failing, the authorities do not encourage citizens to turn to an alternative currency because it would only continue to devalue their local currency if everyone sold it off en masse. Official blocks vary, but typically citizens are not allowed to open dollar bank accounts or if they are, there are limits on how much they can convert each day. If someone is fortunate enough to have a bank that will change money for them, they can store dollar bills under the proverbial mattress. Many do not and are forced to buy 'street' dollars. These unofficial exchanges are not regulated and can be risky, particularly as, once again, the buyer ends up with a wad of notes that can be stolen. You may think that tech-savvy, hard-working people could just move their local currency into dollars through an e-wallet, such as PayPal, but these rarely connect to the banking system in the developing world. They're focussed on the hot e-commerce markets in the developed economies. So, you have people earning a currency which they know is devaluing by the week. These people are forced to either change just a little of their wages into dollars, if they are lucky or take the route of buying street dollars. Neither route is safe and secure. Safe dollars While bitcoin can be used by everyone under any circumstances, it is these people in struggling and developing economies who are usually overlooked. At present there are platforms in which users can exchange their local currency into dollars through a P2P platform. A user seeking to exchange their local currency into dollars would be matched up with a cashier on our platform. When the clients and cashiers get matched up with each other to complete a transaction, the funds are held in escrow until confirmation from both parties is received. The cashiers earn a commission for every exchange they facilitate, and many reinvest their commissions or local currency into bitcoin. They then deposit bitcoin back into the platform when the bitcoin price appreciates, and continue cashiering to gain even more commissions. The client can choose to withdraw the funds back into local currency at a later stage if he is in need of cash. In the meantime, while he holds his funds on the platform, the client's wealth is preserved by a more stable currency (the US dollar). Many use the facility to send dollars to friends and family members, particularly if they are working remotely. The transfer of dollars from one user to another is free of charge, and the funds enter the recipient's account instantly. So, if you have read about bitcoin being unreliable and too risky, consider this. What sounds more risky to you? Relying on an official currency that is subject to damaging inflation, or bitcoin trading which can help people turn their local money into secure currency? SoftBank offers to buy Uber shares - but wants a 30% discount The deal could see SoftBank owning 14% of the company's shares SoftBank executives have told Uber's stakeholders they want the shares at a nearly 30% dis- count based on the company's most recent valuation of $68 bil- lion, possibly in response to the recent bad publicity surrounding the fi rm. SoftBank is leading a consortium alongside San Francisco investment group Dragoneer that has agreed to buy at least 14% of Uber through the purchase of shares from employees and investors. Once the consortium has officially declared its offer, those affected will have 20 working days to agree to the terms. If it doesn't reach the 14% threshold, it will likely increase its bid to encourage more people to sell up. Earlier this month, a spokesperson for the scandal- hit ride-sharing company said, "We believe this agreement is a strong vote of confidence in Uber's long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance." It's thought that while most of SoftBank's investment will be used to buy out current shareholders, around $1bn will be used to buy new shares. Should the deal go ahead, SoftBank is expected to own a substantial part of the company in anticipation of Uber potentially becoming a public company in 2019. The claims come just weeks after the deal looked in doubt. On November 6, SoftBank CEO Masayoshi Son said that SoftBank "had not yet decided on the investment" and that progress would depend on "the price and the terms". If such an agreement could not be met, SoftBank was also considering investing in US Uber rival Lyft. According to Recode.net, SoftBank's $93bn Vision Fund is not only the largest tech fund ever but also "the largest corporate venture capital fund of all time". The Japanese conglomerete has previously invested large sums in UK tech firm ARM Holdings and US telecoms company Sprint. After the announcement, the BBC reported that SoftBank CEO Son "is known to have an eye for potentially transformative industries and trends." As an early investor in Chinese e-commerce giant Alibaba, Son owns close to 30% of its shares.