Twelve years ago and earlier, no one knew the meaning of the word “cryptocurrency. Only 5 years ago it was associated only with bitcoin. In 2021, there will be about 2,300 varieties of digital currencies. This method of payment is confidently moving offline and claiming the status of a full-fledged type of payment, along with fiat currencies. Today, with the support of https://myfin.us/, we will discuss how cryptocurrency is doing.
Initially, crypto-finance was conceived as a democratic and open type of payment, acting as an alternative to centralized financial systems. While it’s not easy yet, the world’s major leaders are showing a growing, but still cautious, interest in crypto. Corporations and Funds, such as Morgan Stanley, are actively diversifying their investment portfolios with cryptocurrencies. MS is considering investing $150 billion in cryptocurrency, and MicroStrategy bought another $15 million in VTS in March, bringing the company’s total investment to $2.186 billion.
Global giants such as Amazon, Google, Microsoft and PayPal are also setting trends. For example, Jeff Bezos recently announced the ability to pay for purchases on the platform in bitcoins, through Purse.io, while the international G search engine has updated its API to work with payment systems and added cryptocurrency as a method of digital payment. And the Windows operating system and X-box solutions can also be purchased for digital coins. Americans are actively introducing crypto in p2p-transfers: US PayPal customers can use Bitcoin, Ethereum and Litecoin for payments.
Why consider cryptocurrency payment methods?
- Juniper Research predicts that the volume of cross-border cryptocurrency payments will increase 25-fold over the next four years, reaching $4.4 trillion in 2024. Accordingly, implementing such a solution means becoming one step ahead of the competition. The fintech world has also reported that Samsung Pay and Google Pay will add cryptocurrency tools to their e-payment systems, although the vendors have not yet commented officially on this.
- Expand its audience. For example, the international payment system Mastercard announced plans to implement support for some cryptocurrencies in its network in 2021, based on internal research, which showed that about 40% of consumers from 18 countries are planning to use crypto as a means of payment in the next year. Among respondents, 77% of young people are interested in learning more about digital assets. This is a direct opportunity to “mine” the most progressive customers. A prime example is the crypto.com app, which has gained membership in PS VISA.
- Despite high volatility, lack of guarantees of government support and other plushies of fiat money, crypto payments are about freedom: it is absolutely equal for clients from Singapore and Venezuela, as well as noticeably lower commissions compared to traditional payment systems, especially for large amounts.
As for the b2c market
For example, in Italy, online shopping with bitcoin payments is more popular than Visa, Mastercard and American Express. An equally striking case from the UAE: blockchain startup Arabian Chain Technology announced the launch of its own digital currency, DubaiCoin, as a means of payment in Dubai stores offline and online. Hundreds of outlets are already using the DubaiPay solution, so the integration of DubaiCoin into this local payment system is also being considered. Global fast food giants KFC and BurgerKing already accept crypto payments as well. According to Coinmap.org, as of May 2021, there are 22,271 payment acceptance points worldwide, from retail outlets to coffee shops to crypto machines.
So what challenges do I see in reducing the volatility of cryptocurrencies and fully implementing them?
Creating clear ecosystems around digital currencies, as well as increasing digital literacy, will help increase their liquidity. For example, in the Mastercard survey I mentioned above, 77% of respondents expressed an interest in learning more about digital assets, and 75% of them agree that they would use crypto if they understood it better. Accordingly, progress will begin with increased IT and digital literacy among the population.
Legislative regulation
It acts as a driver of volatility, and can also lead to the strengthening of crypto. For example, Singapore has had full legislative regulation of cryptocurrencies and companies for a year, as well as MAS registration and operating licenses. Estonia and other Baltic countries have developed separate crypto-legislation, which successfully operates and makes these countries a “paradise” for this kind of operations. At the same time, Heinz Tännler, president of the Swiss Blockchain Federation, promises one of the most advanced regulatory frameworks in the world in 2021.
Malta, Austria, Luxembourg and Switzerland
They are among the most advantageous countries in terms of taxation and digital currency transactions, all of which are actively adapting legislation and developing tax regulations for the full circulation of cryptocurrencies.
I can responsibly say that so far the European Union has one of the friendliest attitudes towards crypto and digital assets in general. For example, Sweden has finished testing the digital krone, and in progressive Germany such financial assets are not subject to taxation, but are considered private property, which makes the country a cryptocurrency tax haven, and the EU itself is thinking about a single digital euro.
In China
The authorities are cracking down on crypto activity by blocking exchanges, prohibiting mining and asset ownership abroad. Except in Hong Kong, where residents can still register a digital wallet and use the electronic currency for payments in Shenzhen, located on the border of the administrative region and Guangdong province in southern China. China’s such policy had a significant impact on the exchange rate in the first quarter of this year.
As for the U.S.
The new legislation allowing banks to open cryptocurrency accounts and store customer funds in cryptocurrency is a real breakthrough that is likely to be implemented in Europe in the near future.
Leading blockchain companies have also begun hiring ex-political officials and financial regulators to streamline their operations. For example, in March, former U.S. Senator from Montana Max Bokus was appointed as an advisor to the cryptocurrency exchange Binance. Another landmark move was the move of former head of the Commodity and Commodity Futures Trading Commission (CFTC) Christopher Giancarlo to the board of directors of blockchain platform BlockFi. Such actions indicate the desire of companies to develop the U.S. crypto market.
Forecasts for the crypto industry
In general, the digitalization of payment methods is inevitable, as is the global change predicted by futurologists – the whole world will change and “digitize.” We already see robots and technology replacing humans in industry, aviation and space. Also in the financial sector: advanced countries do not want to lose profits and are trying to adapt their legislation as quickly as possible. But I am convinced that several factors are needed to fully replace classic money: there must be something real behind it, technology must be firmly embedded in everyday life, and digital money must be easy to use in everyday life. So far, no government is ready to give up the exclusive right to issue banknotes. We can say that there is a high probability that cryptocurrencies will occupy a niche between gold and classic currencies – as tools for accumulation of funds and exchange transactions.
On May 24, it became known that the founder of the hedge fund Bridgewater Associates Ray Dalio owns bitcoins. According to the notorious investor, in the current environment, the main cryptocurrency looks more attractive as a means of savings than gold. Also on this day, another major player Goldman Sachs recognized bitcoin as an asset class that is going through an acceptance phase and has already begun to form a cryptocurrency trading department. And JPMorgan will allow its clients to invest in digital currencies in the second quarter of this year.
But digital assets still have a long way to go to become a clear and accessible ecosystem for even greater offline penetration.