From being an obscure digital asset in the past, cryptocurrency has turned into something that seems posed to revolutionize the world’s financial systems. While many countries remain cautious about adopting cryptocurrency, some nations and multinational companies have decided to adopt the technology with open arms.
Because of their vulnerability and volatility, cryptocurrencies might not be an ideal replacement for fiat money at this point. But this hasn’t stopped forward-thinking individuals, governments, and private sectors from exploring their uses.
While the future of these digital assets remains uncertain, there are signs that cryptocurrency may be in it for the long haul.
- The crypto market is getting bigger
According to a recent report released by the United States Republican Senate Committee, cryptocurrency capitalization has dramatically increased from USD$ 2.2 trillion in January 2022 to USD$ 19 billion in January 2017. (1)
Because of its earning potential and ease of trading, one in five Americans have used cryptocurrency for trading, investment, and other transactions. In addition, there has been a notable increase in the number of financial advisors allocating their clients’ cryptocurrency investment portfolios in the last five years, from four percent in 2018 to 16% in 2021. (1) (2)
Those who chose to place their money on digital currencies cited ease of trading and the potential for lucrative growth as the primary reasons for investing. While the coverage is pretty restricted to a few investors, the figures show a promising trend. A cryptocurrency financial advisor can expect to see more investments in the coming months. (3)
- Governments are reacting to and exploring crypto adoption
Both progressive and developing countries have responded to the possible adoption of digital tokens. The U.S. Treasury Department has forwarded its report on the potential use of cryptocurrency but made it clear that it will not proceed without greenlight from the executive and legislative departments. The ball is now in the hands of the law-making bodies tasked with studying the benefits and downsides of digital currency adoption and the legality of creating such currency. (1)
This move comes at the heels of cryptocurrency use explorations by countries like Australia, Russia, Canada, and China.
Australia has already legalized virtual currencies, which, like traditional cash, are covered by the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006. Since last year, China has been issuing its own digital token and has thus prohibited non-government-issued digital coins from being used in financial transactions.
On the other side of the globe, Canada is exploring the possibility of issuing its digital currency but has yet to recognize virtual tokens. Meanwhile, Russia is studying the viability of accepting digital currency payments for oil and gas. Due to the ongoing conflict, its neighbor, Ukraine, has taken digital currency donations to cover humanitarian expenditures.
- Some countries have been issuing digital currencies
As the world’s wealthiest economies are expressing interest in cryptocurrency adoption, other nations have taken a step ahead to establish their central bank digital currency or CBDC. A CBDC is the digital equivalent of fiat money issued by the central bank. This virtual currency operates similar to crypto money and can be used by governments to compete with the latter.
Countries with their own CBDC include Nigeria, Sweden, China, Russia, The Bahamans, Jamaica, India, and the Eastern Caribbean nations of Antigua and Barbuda, Saint Lucia, Montserrat, Dominica, Grenadines, Grenada, and St. Kitts and Nevis.
- Financial companies have adopted it
Many financial companies have joined the bandwagon to offer cryptocurrency payments and exchanges. A payment processing service provider has reported that the number of cryptocurrency transactions reached 3 million in 2021, a third of which were done exclusively in January. Another world-famous digital payments company has offered cryptocurrency payments and is studying to allow more transactions using digital tokens. (4)
Businesses from other sectors have been accepting virtual currencies as payments, including an online furniture retailers, prominent technology companies, an online travel and booking agencies, and a popular electronic commerce platforms.
- Cryptocurrency use is expanding
The rising popularity of digital currencies worldwide has led to the creation of a system that facilitates ease of use among cryptocurrency users. This global system is called decentralized finance or DeFi, and it aims to make cryptocurrency-driven financial transactions, such as crowdfunding and lending easier for international consumers.
DeFi eliminates the need for traditional intermediaries such as banks and stock exchanges to move money worldwide, making for quick and easy transactions among money senders and recipients. Instead of human interventions and other mechanisms, crypto users can perform transactions directly with one another. By doing so, digital currency users have fewer hoops to jump through when asking for a loan, trading their stocks or investments, and crowdfunding. (5)
Some of the wealthiest countries remain on the fence about digital currency adoption, and for a good reason. While cryptocurrency adoption shows promise, certain risk factors need to be considered. For example, these digital tokens are vulnerable to cyberattacks, volatile, and may have scalability issues.
While few investors claimed to have become richer by investing in digital currencies, the fact remains that high returns aren’t guaranteed. Hence, individuals must understand these dangers before investing in one.
- “Cryptocurrency’s Gone Mainstream”, Source: https://www.rpc.senate.gov/policy-papers/cryptocurrency-goes-mainstream
- “Crypto’s Gone Mainstream; Here’s What Comes Next”, Source: https://www.forbes.com/sites/matthougan/2022/02/16/cryptos-gone-mainstream-heres-what-comes-next/?sh=67182e556432
- 1 in 10 people currently invest in cryptocurrencies, many for ease of trading, CNBC survey finds”, Source: https://www.cnbc.com/2021/08/24/1-in-10-people-invest-in-cryptocurrencies-many-for-ease-of-trading.html
- “Like it or not, you should probably start paying attention to bitcoin”, Source: https://www.vox.com/recode/22383757/bitcoin-coinbase-ipo-crypto-ethereum-cryptocurrency
- “What is DeFi”, Source: https://www.nytimes.com/interactive/2022/03/18/technology/what-is-defi-cryptocurrency.html