At a time when the world enters into the era of virtual currencies, foreign exchanges are still regulated in Bangladesh by backdated rules like the Foreign Exchange Regulation Act, 1947. Moreover, the rule issued by the Bangladesh Bank is not friendly in introducing VCs. Bangladesh should allow the virtual transaction platform for transaction of real currencies to facilitate international trade in goods and services.

1. http://today.thefinancialexpress.com.bd/views-reviews/prospects-of-virtual-currency-in-
bangladesh-1517840704
Prospects of virtual currency in Bangladesh
M S Siddiqui | February 06, 2018 00:00:00
Broadly defined as "tokens" used as money in a country, currency is a means
of exchanging goods and services. The use of currency is intertwined with
the history of money. Money derives its value by being a medium of
exchange which can be a shell, a metal coin, or a piece of paper. The latest
version of currency loses the physical existence and becomes virtual
currency.
At present, rapid spread of internet-based commerce and mobile technology
facilitate the use of virtual currency (VC). Secure online payment systems
such as PayPal and mobile payments and transfer solutions like M-Pesa are
changing the ways of making payments for goods and services.
VC is more advanced currency system than digital gold currency (DGC).
DGC is a form of electronic money or digital currency based on mass units of
gold. It is a kind of representative money, like a US paper gold certificate
during the period from 1873 to 1933. Those currencies were exchangeable
for gold on demand.
There was another form of currency called the e-gold system which was
launched online in 1996 by a US Company and was used by five million
accounts till 2009. It used a central account structure to track and transfer
certificates backed by gold in a central repository with no guaranteed
security and accountability. Since e-gold was not included in the financial
regulatory system, it offered effective anonymity and security. But later, the
transactions were suspended due to legal issues.
Virtual currency (VC) is a kind of electronic money. The transaction doesn't
involve any physical transfer of coin or bill like taka. It has two key elements:
(i) the digital representation of value of "currency" that can be transferred
electronically between parties; and (ii) the underlying payment and
settlement mechanisms, including the specialised electronic ledger system.
VC can be obtained, stored, accessed, and transacted electronically, and can
be used for a variety of purposes. It is used only between the transacting

2. parties who agree to use them. The agreement means acceptance and treat
VCs like taka, dollars, euros, or other forms of money.
The exchange of VC with fiat currency or other VCs or its use in payments
for goods and services outside of the virtual domain is significantly
restricted. There are some convertible VCs which can be exchanged with fiat
currency or other VCs.
Paper currencies' value depends on users' trust that the central authority will
be able to maintain the currency's value. Paper currencies have key
advantages over commodity-based currencies. These currencies are highly
dependent on their central authority to maintain their value. The stability of
these currencies is dependent on governments' macroeconomic policies and
can experience huge fluctuations, even become worthless at a crisis of
excessive inflation.
Financial innovations have allowed people to conduct economic transactions
far beyond the constraints imposed by physical currency. VCs are issued
without the involvement or backing of a state. No one is required to accept
them as payment or to exchange them for traditional currencies. It only
requires acceptance of the users. In other words, a virtual currency is one
that is not administered or issued by a sovereign. The key difference
between virtual currency and real currency is that virtual currency does not
have legal tender status in any jurisdiction.
A VC is a digital representation of value that can be transferred, stored, or
traded electronically and that is neither issued by a central bank or public
authority, nor necessarily attached to a paper currency (taka, dollars, euros,
etc.), but is accepted by people as a means of payment. Side by side, VCs
have become increasingly common in recent years.
The users of VCs store the currency in "digital wallets," which are identified
by their "public keys." The user enters into own digital wallet using his own
"private key." These key's password are random sequences of 64 letters and
numbers. User can enter into digital wallet maintained in block chain and
make transactions.
In the longer term, these technologies have the potential to deepen financial
inclusion by offering secure and low-cost payment options.
As it requires less labour, capital, and infrastructure, the rapid deployment of
VCs over a large geographic area may be less complicated than deploying
traditional currencies.

3. VCs offer many potential benefits, including greater speed and efficiency in
making payments and transfers-particularly across borders--and ultimately
promoting financial inclusion.
The virtual currency marketplace is comprised of many different platforms
where one can convert one type of virtual currency into another or into real
currency. Some virtual currency platforms may lack critical system for
safeguards and customer protections. Without adequate safeguards,
customers may lose some or all of their virtual assets. These are the risk
factors of using VCs.
The critical component of the entire system is the public ledger known as the
blockchain. It is maintained by unidentified private computer networks spread
all over the world and the subscribers are also not known to them. It is
possible that elements of these networks can manipulate the transactions.
The development of effective regulatory responses to VCs is still at an early
stage. These currencies are difficult to regulate as they cut across the
responsibilities of different agencies at the national and global level.
Different international bodies are playing an important role in identifying and
discussing the risks posed by VCs and possible regulatory responses.
At a time when the world enters into the era of virtual currencies, foreign
exchanges are still regulated in Bangladesh by backdated rules like the
Foreign Exchange Regulation Act, 1947. Moreover, the rule issued by the
Bangladesh Bank is not friendly in introducing VCs.
Bangladesh should allow the virtual transaction platform for transaction of
real currencies to facilitate international trade in goods and services.
The writer is a legal economist.
mssiddiqui2035@gmail.com