Investors, pundits, and enthusiasts can’t stop speculating about cryptocurrency, and more often than not, their predictions center on price. But simply musing over the market performance of a specific coin ignores the larger potential of cryptocurrency. This space is about more than price fluctuations — it’s a digital financial revolution that’s poised to transform the world.
Cryptocurrency is arguably the single most significant invention of our lifetime. In the very near future, I believe we’ll see financial borders dissolve almost completely. This international currency will allow us to transact in seconds and remove current geographical limitations and restrictions. There will be no middlemen adding forex, conversion, or other fees to the equation of a transaction.
How do governments and banks feel about this potential disruption? The United States has realized that the issue of cryptocurrency needs to be addressed. The U.S. House Financial Services Subcommittee on Monetary Policy and Trade met in mid-July 2018 for a hearing it called “The Future of Money: Digital Currency.” The subcommittee discussed two pertinent issues.
The first was the importance of regulation. Many regulators fear that governments will lose the ability to control the flow of wealth, which is particularly concerning when it comes to the funding of illegal activities. While the argument was made that it would be a mistake to regulate something simply because it could be used by criminals, there were also voices calling for a strict clampdown on cryptocurrencies. Congressman Brad Sherman went so far as to say that he would prefer the outright banning of cryptocurrencies.
The second issue the subcommittee raised was that of government-created cryptocurrencies. Alex J. Pollock of the R Street Institute said that: “In short, to have a central bank digital currency is a terrible idea — one of the worst financial ideas of recent times.” Pollock argued that “[The Federal Reserve] would automatically become the overwhelming credit allocator of the financial system. Its credit allocation would unavoidably be highly politicized. It would become merely a government commercial bank, with the taxpayers on the hook for its credit losses. The world’s experience with such politicized lenders makes a sad history.”
Yet governments are showing increased interest in cryptocurrencies. Last summer, Blockchain CEO and founder Peter Smith projected that within 24 months, a major government will issue a sovereign digital currency.
Indeed, last year China announced it was testing the development of its own cryptocurrency, and support from the government is one reason it’s leading the blockchain revolution. Similarly, the Bank of Thailand and Ministry of Finance backed OmiseGo, a Thailand-based crypto. Japan, Sweden, the U.K., and other countries aren’t far behind, either. It will be interesting to see where the United States lands on this.
And what about banks? After all, they’re the middlemen cryptocurrencies could potentially cut out. While this isn’t going to happen overnight, banks will have to face the reality of cryptocurrencies in the coming decade. By 2028, I believe it will be normal to be paid in crypto (and not just if you work for a blockchain company).
But for cryptocurrency to truly be easier than cash, it needs to overcome the technical hurdle. Ownership and security of crypto assets can be confusing to the average user. Crypto wallets need to become even more secure and easy to use than digital wallets like Google Pay or Apple Pay, neither of which has gained mainstream adoption yet.
And let’s not forget about the unbanked. Two billion people around the world don’t have bank accounts and can’t rely on their own currency as a store of value. What they do have, however, is access to mobile devices and the internet. The ability to bank and transact value on these devices using a currency that’s immune to regional borders will be incredibly useful.
I believe the move to cryptocurrencies will coincide with the rise of mobile banking and mobile wallet use. The macro-scale outcome will be a massive move toward a globalization of economies and currencies. People are already betting on it. Chicago-based derivatives company CME Group reports bitcoin futures volume have increased every month since December 2017.
In 10 years, people across the globe will have a deeper understanding and acceptance of cryptocurrencies. It isn’t going to fulfill bitcoin’s initial goal of completely toppling the financial system, but it won’t ever disappear, either. A decade from now, both digital and traditional will coexist in harmony, and we’ll have forgotten how complex it once was to use cryptocurrencies.
