Over the past decade, cryptocurrency has become a term that everyone recognizes. Whether it registers as some far-out concept that has something to do with invisible money, or whether you are a crypto geek who belongs to exchange platforms and follows various currencies religiously.
Until now, involvement in the realm of digital currencies has been optional, however, 2020 may be the start of a decade where these intangible exchanges become an unavoidable part of our collective lives.
When bitcoin was birthed, it was in the aftermath of the traditional financial market’s collapse. The possibility of a currency untainted by corruption in banks and governments was highly appealing and the value of bitcoin soared. Yet, as the excitement faded, Bitcoin became more of a trade-able asset than a potential universal currency.
Now, several other digital currencies are rearing their heads, vying to compete with the US dollar as the next universal currency. A move which has both worried and excited various international players.
First there are the currencies with less realistic short-term goals, such as Libra, the digital currency introduced by Facebook. Mark Zuckerberg announced this initiative in October, when he spoke to the US House of Representatives, claiming that his technology-based currency is about promoting “financial inclusion” and aiding people “lift themselves from poverty”.
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.