The SEC has been slowly moving toward approval rulings that protect cryptocurrency investors while promoting innovation – and this bodes well for cryptocurrencies, as thoughtful guidelines pave the way for institutional investing and greater positive public perception.
Naysayers have publicly declared Bitcoin “dead” more than 300 times, citing scalability challenges, price volatility, and most importantly, its attractiveness to criminals. But looking at credit card companies and merchants, the acceptance of Bitcoin as a viable alternative to cash is increasing. Since its release in 2009, Bitcoin has facilitated more than 300 million transactions. Bitcoin, as well as other emerging cryptocurrencies, is starting to disrupt a host of industries.
To date, only about 3.5% of global households are using cryptocurrency as a payment method. This number is likely to increase as developers and regulators solve the industry’s major challenges. Once that happens, the adoption of cryptocurrency by the masses will grow as a payment method as well as B2B transactions.
Here are the four main reasons crypto is here to stay and why it may become a new global currency (replacing fiat currencies):
- SEC approval. A Bitcoin ETF approved by the SEC can protect customers and boost liquidity. Although the SEC’s decisions on the matter keep getting pushed into the future, it’s because they are taking their time to do it right and not implement a knee-jerk policy. SEC approval would not only encourage institutional investment, but represents another milestone in the validation and acceptance of cryptocurrencies. Cryptocurrencies promise to deliver significant benefits including faster transactions and lower fees, transparency, smart contracts, and more.
- Regulation will increase protection, leading to more investment and innovation. Worldwide, demand is growing for a regulatory framework surrounding cryptocurrencies to protect investors, while at the same time encouraging innovation. Since the dollar is still the leading global fiat currency, the US regulatory decisions will likely be the ones to have the greatest impact. Many institutional investors are investigating cryptocurrency investments, but that doesn’t mean they’re investing – yet. They are awaiting for US regulatory guidance and protections to be in place so they can honor their fiduciary duties and protect or compensate their investors from cyber attacks. There is mounting pressure on regulators, but it’s a complex situation and it will take time to develop a comprehensive strategy. Once institutional investors feel safe, they will likely unleash a new and dramatic wave of crypto investing.
- Evolution of blockchain technology
Scaling cryptocurrency transactions to tens of thousands per second is no small feat. Today, emerging technologies are being tested, like Plasma (built on the Ethereum platform) and the Lightning Network (a 2nd layer payment Bitcoin-compatible protocol) to enable faster and cheaper payments. It won’t happen overnight, but scaling cryptocurrency technology will likely be the catalyst for new applications. That in turn would boost the acceptance of blockchain and cryptocurrencies by consumers and businesses. Since financial transactions involving cryptocurrencies don’t require validation by a banking intermediary (thus reducing fees), which makes crypto more appealing to businesses and consumers alike.
- Embracing the Developing World
In countries without a secure and reliable banking infrastructure (especially places where people don’t even have bank accounts), cryptocurrencies could be a lifesaver. Around 1.7 billion people globally don’t have bank accounts. However, two thirds of them own a mobile phone and they could use their phones for financial transactions and to access other financial services based on the blockchain. Currently, according to a University of Cambridge estimate, 38% of people in the Asia Pacific region use cryptocurrency as a transaction medium. Europeans are next with 27%, North America with 17%, Latin America at 14%, and Africa/the Middle East at just 4%. Data from LocalBitcoin suggests that crypto transaction volume is growing in developing regions.
- Digital natives love it.
As cryptocurrencies become more mainstream globally, no demographic is as likely to fully embrace the technology as millennials. As digital natives – many of whom have never set foot in a bank – mature and start making financial transactions, it makes sense that this element of their lives would also be digital. At that point, global cryptocurrency adoption could easily rise exponentially.
Yes, the industry is volatile, but remember the dot com boom? Investment bubbles happen… then they burst… and the ‘herd’ is culled. Only the strong, well-run companies survive. There will probably be more bubbles and bursts, largely fueled by speculators, but ultimately we’re experiencing the dawn of a new era. Where would we be, after all, without the Internet?