1. Mainstream Adoption
- Corporate Acceptance: Companies like Tesla, PayPal, and Square are accepting cryptocurrencies as payment. This not only legitimizes digital currencies but also encourages consumers to use them.
- Integration into Financial Services: Traditional banks are offering cryptocurrency-related services, such as custodial services and trading platforms, making it easier for the average consumer to access digital currencies.
2. Technological Advancements
- User-Friendly Platforms: The rise of intuitive wallets and exchanges has simplified the process of buying, selling, and storing cryptocurrencies. Platforms like Coinbase and Binance make it accessible for non-tech-savvy individuals.
- Layer 2 Solutions: Technologies like the Lightning Network for Bitcoin and Ethereum’s scaling solutions help reduce transaction costs and speeds, making daily transactions feasible.
3. Government Initiatives
- Central Bank Digital Currencies (CBDCs): Countries like China, Sweden, and the Bahamas are piloting or launching CBDCs, which could revolutionize the way people interact with money and integrate seamlessly with existing financial systems.
- Regulatory Frameworks: As governments create clearer regulations, the risks associated with digital currencies decrease, making them more attractive for the general public.
4. Changing Financial Landscape
- Banking the Unbanked: Digital currencies offer financial services to people without access to traditional banking systems. Mobile wallets and cryptocurrencies can empower individuals in remote or underserved regions.
- Decentralized Finance (DeFi): DeFi platforms provide alternative financial services like lending and borrowing without traditional banks. This opens new opportunities for savings and investment.
5. Investment Opportunities
- Diverse Asset Classes: The growth of various cryptocurrencies and tokens offers different risk-return profiles, attracting both conservative and aggressive investors.
- Increased Institutional Interest: Major institutional players are entering the crypto space, providing validation and stability, which may entice more retail investors to participate.
6. Cultural Shift
- Digital Natives: Younger generations are more comfortable with technology and digital currencies, leading to a cultural acceptance that could drive widespread usage.
- Social Media Influence: Platforms like Twitter and TikTok have fueled discussions and trends around cryptocurrencies, influencing public perception and encouraging adoption.
7. Global Economic Trends
- Inflation and Currency Depreciation: In times of economic uncertainty, people often look for alternative stores of value. Cryptocurrencies, particularly Bitcoin, are seen as a hedge against inflation.
- Remittances and Cross-Border Transactions: Digital currencies can significantly reduce the costs associated with remittances, making them an attractive option for many families around the world.
Facebook’s lofty goals, spearheaded by this digital currency, would create a global payment network that avoids the regulatory scrutiny of current banking systems which often kills competition and raises prices.
Theoretically, the ability to send money around the world with ease could transform Libra into a main player in terms of global currency. But practically, it is almost impossible.
Firstly, there is the problem of trust. After the Zuckerberg fiasco of this year, people do not trust Facebook with their private data, some even claim it is a threat to our democracy. Then there is the ambiguity behind the Libra design. US policymakers have stated they have no idea what Libra is. Such a lack of clarity is bound to lead to regulatory hell.
Not to mention that Libra’s proposed system of providing ‘banks for the un-banked’ will require due diligence and ‘Know Your Customer’ regulations to combat money laundering, resulting in a similar process to that of banks today…defeating the entire aim.
Clearly. There are far too many wrinkles to smooth out before considering Libra a current up-and-comer in the realm of universal currencies.
The other digital currency whose launch is imminent, is the Chinese renminbi. Recently, we have seen a handful of countries attempt to diminish the disproportionate control of the dollar by turning to digital currencies. Governments such as that of Venezuela and North Korea are apparently already using cryptocurrencies to evade US sanctions.
However, none hold that much weight, or symbolize that much of a threat quite like the digitization of the Chinese renminbi.
For China, the aim of their blockchain ambitions are not simply to avoid sanctions, but to “displacing US influence in the global financial system” which they see as “a national priority.”China has apparently been researching blockchain extensively since as far back as 2014, and 2020 is said to be the year when they may begin small scale experiments within the country . If tests go well, the currency will presumably go live shortly after.
If China successfully implements their cashless currency, they would then replicate it across Asian economies which account for more than half of the world’s population. Clearly, even their decision to explore digital currencies is monumental.
With powerful entities such as Facebook and China gearing towards introducing digital currencies, it is becoming evident that this decade, crypto will become a far more influential player in the global economy.
