The present money system looks fragile. There is a prediction that digital currencies will be rising to more than 200 million users by 2030. The market capital of the crypto industry worldwide stands at more than $2.5 trillion. Also, they may replace cash because there has been a growth in the demand for a highly decentralized payment method and anonymity. Visit the official site to know more about cryptocurrency.
There is no control of government:
- Traditional currencies are no more backed up by valuable metals. However, governments are seen to support the usage by accepting traditional currencies for tax payments. Such currencies may not be coins or physical bills.
- Recently interest has been found in Central Bank Digital Currencies as physical currency coins and notes’ digital replacement.
- Till now there are five countries that have introduced their trial and many other countries are still exploring all possibilities.
- A major difference is present between crypto and this digital replacement.
- A central bank-issued Central Bank Digital Currencies and are fully backed by the trust and approval of the government.
- But crypto is never backed by the government and an algorithm sets and manages it.
- A currency’s viability depends on trust. People believe that everyone will be accepting it to make payments, and this situation needs the currency not to lose its value fast.
- The trust in a traditional currency’s viability or a Central Bank Digital Currencies comes via a government’s backing.
- But all trust in crypto’s viability comes via its distributed ledger that is publicly observable and shows all transaction histories.
Crypto is a risky asset:
- The major legal attraction of crypto is a risky asset. There are huge concerns regarding systemic effects upon financial stability.
- People gambling on Bitcoin are well aware of the risks as they have an understanding of its volatility.
- There is a possibility that if these individuals lose their money there will be no such effect throughout the entire financial system.
- However, concerns are there regarding the manipulation of crypto’s price.
- It has raised the fraud issues apart from concerns that crypto’s market collapse that includes more than $2 trillion of market value may knock over to the traditional financial system.
Current scenario of cryptocurrency as money:
- Cryptocurrency is used as money on a small margin even after all the challenges it faced.
- PayPal, the payment platform added these digital currency features to their application. The users can make use of currencies such as Ethereum or Bitcoin.
- Bitcoin got a legal tender’s recognition in El Salvador who was the first country to take this step. Malta is also working to integrate cryptocurrency into conventional usage.
- Crypto has been added as an option of payment in India by a home décor company named the Rug Republic.
- Thus it is quite evident that crypto is slowly making its way into daily transactions.
How does the future look?
- The concept regarding money is evolving constantly.
- Once, money only existed in the physical form, but now no one can imagine living without digital payment.
- Nobody will be surprised if, in the future, crypto will work as money.
- You will be able to use cryptocurrencies to make payments for a cup of coffee or for flight fares.
Public imagination has been captured by crypto. However not as they were intended. They are not considered to be a reliable exchange medium. They come with anonymity which makes them alluring for illicit and illegal transactions. Yet it is never a desirable final from any societal perspective. Now the major attraction of this digital currency is in the form of a speculative asset but with a huge amount of volatility. It has been presently configured that because of the high electrical demand of crypto mining there are many concerns related to the environmental consequences.
The ease to use central bank cryptocurrencies not only to make domestic payments but also international ones will be improved with technological advancements. Also, a great demand lies for cheaper, lower, and better cost services, mainly for people who do not have a debit/ credit card or any bank account. It is not much clear if cryptocurrencies issues privately will be able to act as an effective exchange medium.