The current financial system is seen by many as highly inefficient, due to its centralisation. Banks, governments and middle men are in control. People should be allowed to move money freely anywhere they wish, but our current financial system doesn’t allow that.
A global economy needs a global digital currency. What cryptocurrencies do is transform how people think about a real global economy. In essence, they level out the playing field.
There are 1.8 billion people in the world who own a smartphone but have no access to financial services. However, crypto allows anyone with a smartphone, anywhere in the world, to access financial services, thereby participating in the global economy. Over the past decade, the world has been experiencing a relentless move away from fiat money towards cryptocurrencies. That said, the concept of cryptocurrencies and blockchain, the technology that underpins them, is not without its critics.
Nevertheless, there are more and more high-profile crypto exponents who are coming out in support of digital currencies, including Microsoft founder, Bill Gates; Virgin boss, Richard Branson; and PayPal co-founder, Peter Thiel.
Moreover, last year the prime minister of Malta, Joseph Muscat said at the general debate of the 73rd Session of the General Assembly of the U.N. that Malta is the “first jurisdiction worldwide” to regulate the technology that “previously existed in a legal vacuum”, and defined the potential of blockchain and cryptocurrency, calling them an “inevitable” part of a digital future.
Mr Muscat added that blockchain will inevitably provide solutions that can supersede current infrastructure in major industries such as healthcare. The prime minister stated: “Blockchain can provide solutions to health care systems where patients have real ownership of their medical records. Emissions trading systems can be taken to the next level. We can help verify that humanitarian assistance is reaching its intent destination. We can make sure that nobody is deprived of their legitimate property because of compromised data.”
There are a number of key reasons why Mr Muscat and other high-profile cryptocurrency supporters are right to assume that digital currencies are the future of money.
First, digitalisation. Every part of life, the world economy is no exception, is now becoming increasingly digitalised. Indeed, digitalisation is now broadly dubbed the ‘fourth industrial revolution’. Of course, cryptocurrencies are digital by their very nature.
Second, globalisation. Regardless of what some of the cryptocurrency cynics would want people to believe, we are living in a progressively more globalised world in terms of trade, commerce and the movement of people across the globe. Cryptocurrencies have no borders.
Third, decentralisation. Cryptocurrencies allow for direct transactions, with no middle parties in between. They are not managed or controlled by governments, banks and other financial institutions. One of the most fundamental risks of decentralisation is a single point of failure. If you place all your money in one bank and that bank fails, you could lose everything. However, by using the immutable, peer-to-peer blockchain on which cryptocurrencies operate, having your money on lots of different individual nodes, such as smartphones or hard drives, eradicates the threat of a single point of failure.
Fourth, cryptocurrencies and blockchain offer workable solutions and enhancements for numerous sectors including finance, retail, healthcare, the arts, real estate and technology. This is also a key reason as to why banks and financial institutions around the world have already adopted and are working with digital currencies, which is a tendency that is predicted to gain momentum and expand. As an example, XRP has recently been placing itself to become a foremost international facilitator of global remittances and inflows.This is a massive market which continues to grow, particularly in the emerging economies of Latin America, Asia and Africa.
Fifth, regulation. The international regulation of the cryptocurrency sector is now globally seen as inevitable. This is an opinion shared by Christine Lagarde, head of the International Monetary Fund; Mark Carney, the governor of the Bank of England; as well as an increasing number of other G20 countries’ regulators.
Talking about cryptocurrency regulation, Ms Lagarde stated in an article entitled ‘A regulatory approach to Fintech’ published in the OMFIF bulletin magazine: “We must understand innovative technologies, learn from them, and perhaps even adopt some of them to improve regulation, supervision and surveillance. In some cases, it will be enough to apply existing regulations. In others, new approaches may be required as risks emerge and as distinctions between entities and activities break down. One thing seems certain: we should not put off action until the answers become clear. Instead, we must begin to consider the regulatory framework of the future.” In addition, the BoE governor opined in March last year: “The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities.” Regulation increases credibility, certainty and legal assurance. This leads to confidence and, typically, a long-term upward trend.
Sixth, is the irrefutable force of FOMO, or The Fear Of Missing Out. Indeed, FOMO is predominant when it comes to cryptocurrencies as I believe there’s a mounting sense amongst institutions that unless they adopt and welcome this burgeoning sector, their competition could move ahead, way out in front, meaning it could be tough for them to catch up. This is particularly the case as their customers are becoming more and more enthusiastic to explore the opportunities that cryptocurrencies bring for themselves.
A global economy needs a global currency that everyone is responsible for and invested in. This opens up opportunities for everyone, no matter where they are in the world. It’s my view that cryptocurrencies will be as influential and have the same impact, if not more, as the internet has had. It would be impossible to imagine a world today without the internet. Already cryptocurrencies have forever changed the way the world handles money, performs transactions, conducts business and manages assets. Whist the digital currency cynics would have us believe otherwise, the world is most certainly not going to move backwards in relation to digital, global currency. Looking at the fundamental, life-changing effect the internet has had, the same will inexorably happen with cryptocurrencies, as they are, undoubtedly, the future of money.