On paper, the concept of cryptocurrencies or digital money would seem rather far-fetched for some. After all, how is it possible for a currency to be a store of value when it simply does not exist in physical form.
The answer is simple. Cashless transactions and globalization have allowed for transactions to be performed remotely without being physically present.
Where in the past, most would think twice about sharing bank details over the internet – we now freely hand over credit card information and other financial details without hesitation.
Online shopping and internet money transfers have made the use of physical cash payments redundant. Where in the past cryptos were mainly used as a means to facilitate anonymous cash transfers, virtual currencies have slowly begun creeping into mainstream life.
With that in mind, we ask the question – what is the future of cryptocurrencies going to be like?
1. Increased government oversight
Cryptocurrencies have always been viewed by governments with a fair amount of consternation. The fact that these currencies are not issued or controlled by any single entity makes enforcement a nightmare.
Furthermore, the pseudo-anonymity offered has made cryptocurrencies a favorite of criminals. From drug dealers receiving payments on the deep web to money launderers “cleaning” dirty money, cryptocurrencies are a criminal’s dream come true.
All of this coupled with increased acceptance of cryptocurrencies (Bitcoin in particular) means that increased government oversight will become inevitable. Cryptocurrency exchanges will be required to comply with government regulations that place restrictions on their activities.
While this may sound like bad news to more hardcore crypto enthusiasts, the added government oversight could potentially be the catalyst needed to bring the industry into the mainstream.
2. Widespread adoption (and taxation)
With the COVID crisis forcing millions into lockdowns, governments all over the world have turned to stimulus packages in order to keep their economies afloat. This has resulted in an unprecedented rate of government spending while tax revenues continue to fall as businesses close down and employees are laid off.
In an effort to shore up their finances, it is fair to expect governments all over the world to begin levying taxes on the crypto industry. From capital gains to additional income taxes, the crypto industry is rife for taxation and with the recent bull run, it should come as no surprise when the taxman comes knocking.
3. Cryptocurrencies as legitimate investment assets
Institutional investors have contributed significantly to the rise of Bitcoin and other cryptocurrencies as a major investment. So much so, the market for Bitcoins has changed drastically within just a span of several years.
Whilst extremely volatile, the entry of institutional investors into the market has “legitimized” Bitcoin in the eyes of more casual investors. Thus, in the near future, we may begin to see casual investors making the shift towards cryptocurrencies.
One sign of this can be seen by Paypal making cryptocurrencies such as Bitcoin, Bitcoin cash, Ethereum, and Litecoin available for purchase by customers in the US.
4. Investors turning to stablecoins
Due to the volatile nature of cryptocurrencies such as Bitcoin, they can be a rather risky investment for the unprepared. That’s why some people keep wondering how many bitcoins are there in total and if it’s still worth mining it.
Due to this, it has given rise to a variety of alternative cryptos known as stablecoins.
Unlike mainstream cryptos, stable coins peg their values to that of an existing fiat currency. For example, Tether is a popular stable coin that is “tethered” to the value of the U.S Dollar. These cryptos blur the line between fiat currency and cryptocurrency.
Looking to tap into the burgeoning cryptomarket, stable coins offer investors the opportunity to invest in crypto whilst still keeping their risk exposure relatively low.
2020 has been a volatile year for everyone with the world-changing at an unprecedented rate. Cryptocurrencies will only become increasingly popular with time as can be seen thus far.
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