In December 2019, Deutsche Bank said that cryptocurrency was on track to replace fiat currency by 2030. Reasons for this prediction included an increase in interest in different cryptocurrencies and ongoing fragility of the foreign exchange markets.
The international investment bank noted that while they were interesting additions to the financial scene right now, they had the potential to replace cash by the beginning of the next decade. Other factors including in an ageing population, increased salary and labour costs, and an abrupt end to years of low inflation rates could all speed up this process.
But is this really the case? Can cryptocurrencies really take the place of the pound, dollar, and Euro?
What you'll learn 👉
As the COVID-19 pandemic spread around the world in 2020, it changed everything. No sector was left untouched by the event and it even influenced the way we consider cash. Firstly, with people locked at home, using digital payment methods increased in popularity. Secondly, in cases where transactions were conducted face to face, there was a hesitance to handle physical cash. Fears over the transmission of the virus and increased hygiene protocols drove a sudden shift away from coins and notes and towards contactless or completely digital payments. As a result, cryptocurrency had an opportunity to shine. There were marked increases in people mining, buying, and trading cryptocurrencies and more interest in buying products and services using different virtual currencies.
That said, digital fiat transactions also saw an increase in popularity. Due to the volatility of the various currency markets throughout the year, there was a big jump in the number of new trading accounts opened online. These were predominantly fiat, although some allowed trading pairs that include both fiat and cryptocurrency. In terms of fiat brokers, first-time traders learned to navigate the different trading options by reviewing the top forex broker expert picks. Through the thorough reading of reviews and comparisons of 150 of the best forex brokers, they were able to decide whether it was for them. Beyond that, there is information regarding fees structure and details about how the best brokers were picked.
The popularity of fiat trading, crypto trading, and fiat-crypto trading is something that is expected to remain steady as we move through 2021. Cryptocurrency trading is not likely to eclipse the demand for investing and trading on the foreign exchange market.
In developing countries
The World Bank estimates that there are 1.7 billion adults who do not have access to a bank account. This means that they are also unlikely to have access to any form of electronic payment such as debit cards. In a world where commerce is increasingly online and many online providers offer lower prices, this is a huge disadvantage to the unbanked. Furthermore, it also makes it harder for them to save, get a mortgage, or invest in a business. Cryptocurrency has the potential to open a world of possibilities for those living in third countries. Not only will they be able to interact and utilise the online world, but they will have many other avenues opened to them.
Additionally, cryptocurrency can help reduce corruption and ensure that NGO and government funds are appropriately distributed. As cryptocurrency transactions are recorded on the blockchain, this can bring much-needed transparency, honesty, and accountability in community projects. Similarly, the lower costs and faster times of cryptocurrency transactions are a big benefit to poorer and developing communities.
There are however some limitations when it comes to cryptocurrency. The biggest of these is the issue of value volatility. Of course, fiat currency is also volatile but cryptocurrencies tend to be more so. For example, Bitcoin is one of the most well-recognized cryptocurrencies and has been valued at as much a $23,000 a coin but it has also reached lows of a few hundred or a few thousand dollars. These big drops cause concern for investors who are hesitant to invest until the price stabilises. Similarly, the value of such coins would need to stabilise before more merchants would be interested in receiving payment that way.
Some concerns need to be ironed out with compliance. As cryptocurrency is essentially anonymous. States such as Malta have already taken steps to implement checks and balances on cryptocurrency to ensure full transparency. Despite this, there is still some way to go before a happy medium between compliance and anonymity/pseudonymity can be found.
But who really knows what will happen in the coming months, and years? If 2020 taught us anything, it’s always to expect the unexpected. The world is continuing to change and become more digitized and if fiat wants to remain on top, it will have to catch up with crypto in several ways.
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com