Contemporary IPE Issue: Virtual Currency Social Research Paper

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Contemporary IPE Issue: Virtual Currency
Introduction
The Arab oil embargo of 1973 by the Organization of Petroleum Exporting Countries (OPEC) enlightened the Intellectual Entrepreneurs (IE). The United States' dependence on foreign oil-producing countries came to haunt them because of its political and military affiliation to Israeli, an enemy of the OPEC nations. The economic and foreign policy crises that befall the U.S and the OPEC countries following the embargo became an eye-opener to the I.E.s of that time. They reconsidered the premature concept of the International Political Economy. IPE field seeks to bridge the gaps in the political and economic domains that come about because of the complex interdependence of world economies that has since become influenced by politics and foreign policies (Cohen 17). The pioneers of IPE left enduring legacies on the interdependence of the two contrasting domains.
As the world comes of age, the human race creates political, social, and economic institutions that continue to validate IPE's concept and significance. Many issues are surrounding IPE, but the idea of a virtual economy resonates well with globalization that seeks to facilitate seamless communication and transactions without having to bother about the constraints of international policies. Virtual economy is accomplished by using virtual money that is enhanced with the disruptive technologies of the 21st century, blockchain, to be specific. The cryptocurrencies that have not been accepted as legal tender by any monetary authority or the central banks in the world continue to provide stiff competition to the traditional fiat currency, even with the many shortcomings associated with them the world-leading economists. On the flip side, there has been tremendous achievement with cryptocurrencies. This begs the question, should the economic and political classes down their tools in denouncing the cryptocurrencies and accept them as legal tender with strict regulation or do away with them completely?
Virtual Currencies
Virtual currency is subject to varied definitions depending on the monetary authority and economic principle one has subscribed to. The bottom-line of the diversified definition is that V.C.s represent value digitally and can be transferred from one place to the other electronically without the monetary institutions or policies (Dabrowski and Janikowski 13). V.C.s fall short of the formal definition of money basically because of its inability to act as a store of value and has fewer merchant's trading and accepting it as a means of payment compared to the traditional money (Dabrowski and Janikowski 13). V.C. is highly volatile, further increasing the risks of plunging the stakeholders into an economic crisis that stable currencies seek to address. Most V.C.s rely on cryptographic and blockchain technologies in the development and transaction. Thus the term cryptocurrencies are commonly associated with the wide range of V.C.s available in the market today.
V.C.'s potential to substitute wholly the formally accepted means of payment while bypassing the monetary regulations imposed by the different financial institutions globally because of its anonymity and decentralization raises very important concerns that relate to the IPE. Besides, the availability of V.C.s in the decentralized systems has inspired some world-leading economies to consider the creation and adoption of digital fiat currency. China is at the forefront in creating a central bank-backed digital currency, Digital Currency Electronic Payment (DCEP) or simply e-yuan (Peters et al. par.1). This has been seen as a potential compromiser of the monetary sovereignty of the U.S. dollar and may spark global political and economic crises. The issue thus qualifies as a key IPE issue of the contemporary era. Besides, the potential of e-yuan to facilitate foreign exchanges digitally could transform international trade and foreign policies unimaginably.
Cryptocurrency, Digital Fiat Currency, and Stablecoins
An important aspect of V.C.s is the fundamental differences between ordinary cryptocurrencies and digital fiat currency (DFC). Unlike ordinary cryptos like Bitcoin, a DFC DCEP is backed by the central bank as the legal tender (Kirkby 528). Because stable assets back the DFC, it overcomes the volatility that has become a major shortcoming of ordinary cryptocurrencies. With the dire need for decentralization and cryptocurrency stability, the third class of virtual currency emerged. Stablecoins can either be backed by the sovereign currency, other cryptocurrencies or simply pegged to precious commodities like gold and silver valued by the c...