Introduction
The digitization of financial services, the advent of mobile and E-banking, non-cash payment systems, mobile online payment systems, and other developments have laid the framework for future financial technology growth. Financial structures in both developed and developing countries may be altered. The change to a dual working regime (online and offline) has enabled enterprises to profit fast, work long distances, and cover vast areas. This study will look precisely at the effects, potential, and issues that FINTECH (Govcoin) has on accounting in the UAE’s local exchange market (Desmond and Kotecha n.d.). It will investigate the social and economic macro-drivers driving this innovation, as well as the social/economic difficulties and potential solutions to some of these problems. Management in the accounting and local exchange sectors regarded the emergence of FINTech as both a problem and an opportunity for accountants and aspiring accountants to prepare for the digital age.
Business and Economic Disruption Resulting from GOVCOIN
The Central Bank of the United Arab Emirates ordered the formation of its digital currency in the midst of the unregulated growth of cryptocurrencies. The plan consists of the CBUAE’s 2023-2026 plan, which seeks to establish itself among the world’s most important central banks. The CBUAE announced seven aims in its statement, including the issuing of digital currency – known as CBDCs or Govcoins – and accelerating technological change in the UAE’s finance industry through the application of cutting-edge artificial intelligence and big data technologies.
The approach will also include the use of advanced technologies in investigation, tracking, and insurance structures, as well as the use of the UAE’s digital ID infrastructure to increase economic growth and generate financial services more accessible. As global ESG awareness grows, the plan will support the UAE’s green economy initiatives, and the CBUAE will focus on establishing more innovative financial infrastructure to increase the UAE’s competitiveness.
Key Opportunities of GOVCOIN Innovation
The main advantages of GOVCOIN include the speed and low cost of transactions since it eliminates the need for a slew of intermediaries and allows you to move at breakneck speed. v Different countries will implement them in various ways, but they all have in common that they are all overseen by the government (Taskinsoy, 2019). This gives the government more capacity to enact monetary and fiscal policy quickly. It also allows it to monitor funds as well as control where it goes.
Govcoin will be designed exclusively for the cryptocurrency system for local businesses in the UAE. Still, it does have the prospect to produce a vital part in tackling the difficulties faced by infrastructure-poor economies. The technology provides a decentralized ledger system for securely storing and transferring data in a fully anonymous way. As a result, it may easily be employed as a payment mechanism in the economic and financial sectors, replacing old monetary units with cryptocurrencies. However, despite its numerous uses, does financial technology have the potential to alleviate global economic challenges, particularly in UAE-based industries? These are some of the economic and social issues that Govcoin aims to address in the UAE.
Risk Posed by GOVCOIN Innovation
Most commercial banks may face an existential threat from Govcoins. Why would anyone choose a high street bank if central banks could provide the same service at a lower cost and greater security. If banks’ deposits were lowered, the financial system would be drastically altered since banks would have less money to spend on mortgages and the economy (Guides, 2020). CBDCs pose serious issues regarding data privacy and overbearing government control (Campbell-Verduyn, 2018). Without protections, digital currencies’ enormous power – conceivably, the ability to observe every purchase – may convert central banks into financial Big Brother.
Opinion on GOVCOIN
The development of digital currencies is unavoidable, but depending on which versions prevail, the “revolution could go in two directions, according to Prof Randall Kroszner of the University of Chicago Booth School of Business – perhaps decentralization as well as economic forces triumphed, or centralization and government supervision triumphed (Campbell-Verduyn, 2018).
Events That Resulted to the Release of Govcoin
Recent events in the UAE have demonstrated a favourable attitude toward cryptocurrencies, most notably in Dubai, where the licensing authority has begun taking Bitcoin as payment (Ceeol, 2019). On the other hand, the administration has warned citizens about scams, warning them to be wary of fraudsters acting as well-known exchanges and promising unrealistic gains to deceive investors (Nguyen and Dang 2018). The UAE’s central bank intends to use Emiratis’ digital IDs to deliver hassle-free fintech services and lay the groundwork for quick digital transactions using virtual currencies. The strategy’s ultimate goal is to place the UAE’s financial authority among the top ten central banks (Allison, 2019). Late last year, the country collaborated with Saudi Arabia to develop digital money. Compared to Kuwait, which has raised reservations about the volatility of blockchain-based money, the government has been more open to the crypto movement (Rana et al., 2019). Turkey went considerably further, criminalizing the usage of cryptocurrencies in transactions and those who trade in them.
Economic and Social Problems
While Govcoin will be developed specifically for the cryptocurrency system for local industries in the UAE, it could play a critical role in addressing challenges faced by the UAE’s infrastructure-poor economies (Goundar, 2020). The technology, which provides a decentralized ledger system for storing and distributing data in a secure, largely anonymous manner, will primarily be used to keep track of financial transactions (Sharma et al., 2021). This means that it might easily be used as a payment system in the economic and banking sectors, with traditional monetary units being substituted with cryptocurrencies. All that is required is a reliable internet connection. Anyone across the UAE will be able to conduct transactions immediately, safely, and without remittance, culminating in a blockchain economy grounded on a peer-to-peer trading system (Nguyen and Dang 2018b). Nevertheless, despite its many applications, does financial technology have the ability to solve global economic problems, especially in UAE local industries? These are some of the economic/social situations that Govcoin seeks to address in the UAE.
Global Trade and Regulation
Globalization is defined by the Peterson Institute for International Economics as the increasing interdependence of the global financial system, civilizations, as well as populations as a consequence of cross-border trade in goods and services, technologies, and migrations of investments, persons, and data (Francescangeli, 2020). UAE has formed economic alliances to support these flows throughout time, but significant hurdles remain. When Govcoin is adopted and used, it can improve the speed and convenience of international transactions while lowering prices, helping to level the playing field between those who can and cannot afford financial services (Garnizova 2022). By offering a safe, inexpensive solution to cross-border transactions, FINTECH can provide financial inclusion for merchants in emerging nations, allowing them to participate in the global economy fully (Smirnov and Lukyanov 2021). Technology also enables more outstanding communication and cooperation throughout the finance and banking industries and significantly enhances supply chain management.
Property Rights and Real Estate
With expanding infrastructures, real estate and property rights can be challenging to track in the UAE — data may not be backed up, transactions may be finalized with a handshake, and paperwork may be stolen or destroyed. As a result, transparency and accountability are essential issues in this industry. Govcoin will be an excellent tool for identifying ownership and maintaining untenable property records. In this manner, technology also eliminates the intermediary, lowers expenses, and aids in verifying information in real estate transactions.
Identity Verification
Govin technology provides a revolutionary method for securely storing personal identity and information. As a result, it has the potential to generate novel methods for refugee identification (Al‐Yateem et al., 2020). Refugees cannot establish a bank account, vote, or acquire a loan without a tag. They may also have difficulty accessing healthcare, and failing to provide identification evidence might result in several delays in receiving legal paperwork.
Advancement in the UAE
Adopting Govcoin technology and cryptocurrency might be critical in assisting the UAE to thrive economically through “leapfrog” — a method that entails utilizing new technologies to circumvent traditional phases of infrastructure development and fill gaps (Al‐Yateem et al. 2020).
Social and Economic Macro-Drivers Behind the Govcoin Innovation
The potential for radical financial innovation and entrepreneurship has been attributed to the rise of Govcoin. Fintech improvements, on the other hand, entail an understanding of the nature of the requirements met by such innovation. We focus on socioeconomic and institutional factors linked to possible drivers of interest in cryptocurrency development. The alleged limitations of traditional financial institutions drive Govcoin adoption—more adoption in locations where banks and the financial system are widely distrusted. When there is a high possibility of narcotics-related money laundering, Govcoin usage is at its peak. This latter discovery might lead to an increase in anonymous online bitcoin crime. The broad acceptance of Govcoin is a fascinating feature of the twenty-first-century economy. For scholars investigating digital currencies, understanding the reasons for their broad acceptance is crucial. Govcoins can disrupt existing actors in entrepreneurial finance’s business models and are expected to have substantial ramifications for business very shortly.
Stakeholders, Winners, and Losers of Govcoin
There are standard and critical FINTECH stakeholders in the UAE who must play a significant role in forming Govcoin: the government, financial institutions, and entrepreneurs. The persistent engagement required among governments, financial institutions, and entrepreneurs makes establishing and fostering a FinTech ecosystem challenging (Chipanje, Ying and Haiping 2021). For a FinTech ecosystem to thrive, each player must clearly understand their position and the rewards they stand to receive from participation. To encourage the establishment of the Govcoin ecosystem, governments must create and implement regulations and offer a regulatory framework. This encourages entrepreneurship and job creation in the financial services and technology industries. It also improves the country’s overall competitiveness. By developing agreements with Govcoin enterprises, financial institutions may be able to provide important information and market knowledge to the ecosystem. This might lengthen the time it takes for new goods and services to reach the market, increasing competitiveness. Entrepreneurs contribute to the Govcoin sector with creative and often disruptive technology solutions. In exchange, entrepreneurs have increased access to capital and commercial experience and a market open to their inventions.
Advantage and Disadvantages of Govcoin
There are various benefits and drawbacks that are associated with Govcoins. Firstly is about the advantages. A digital value would be a fast and secure payment system that combines the advantages of cryptocurrencies and state currency. Processes and transactions, as well as expenses, would be minimized and simplified. Central banks would regulate the amount and remuneration of circulating cryptocurrencies, making monetary policy more efficient and centralized. Central banks might employ digital money to strengthen their stabilizing role during crises, recessions, and deflation. This would enable them to actively engage in investments and consumption by altering the interest rate on digital deposits, supporting individuals in setting up virtual wallets and stimulating aggregate demand through ad hoc measures. Money laundering, tax evasion, and other financial crimes would be reduced if CBDC transactions were monitored and supervised.
Secondly, is about disadvantages of Govcoin, where CBDCs may become dominant in international finance, but this will have implications for privacy and the shifting role of commercial banks. If the currency is an anonymous payment method, its digital counterpart might be easily regulated and watched. Consider swift punishment or bank account freezing in the event of poor behaviour. Alternatively, a currency designed to discourage or compel specific sorts of expenditure. For example, prevent the purchase of certain goods or services such as abortion.
It may also result in the abolition of private banks, requiring central banks to hold our wealth in CBDCs. If most individuals deposited their money in central banks, private banks would be unable to make loans, which would harm consumption and investment. The existing financial system is riddled with problems, but the alternative is considerably worse. As savers see digital currencies as a safer alternative to bank savings, capital flight from banks will accelerate in tandem with the financial crisis. Central banks do not want to be involved with credit allocation: it is simple to be financial stability guarantors if you can delegate daily interaction with privates to others. The extensive use of CBDC, on the other hand, would expose central banks to severe risks.
Conclusion
Finally, the Govcoin cryptocurrency is a vital Fintech product for the UAE because, as previously stated, it reduces financial trading is reliance on financial intermediaries and contributes to the expansion of the digital economy in the UAE’s local exchange market. The UAE must establish its own CBDC since it will benefit both its people and international nations. Simultaneously, some critical data processing technologies improve resource allocation efficiency while encouraging financial market reform and development. There may be disadvantages to utilizing Govcoin in the UAE, but they cannot outweigh the advantages. Govcoin is the next big thing in the world’s banking sector, and it is critical for every country, including the UAE, to adapt to the changes to reap the benefits of this innovation.
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