Happy New Year to everyone! It is not far-fetched to say that 2020 will be the year that digital currencies make their mark on the world. Cryptocurrencies have demonstrated that the world is going to be dominated by crypto and digital currencies, eventually. Once there are robust rules, laws and guidelines to protect and nurture the digital currency framework, the financial world will be entirely digital. The transition toward digital currencies is hinged on the confidence and usability infrastructure developed to accommodate this change. The adoption rate of digital currencies will also depend on the accessibility, usability and acceptance of these currencies in global trade. Exponential growth will only be achieved when people find it safe to exchange their current currency of choice into its digital equivalents. Having the ability to earn all or a portion of your regular income in digital currency will see the switch happen at a lightning-fast pace.
There is a difference between digital currencies and cryptocurrencies. Digital money is centralised, while crypto is decentralised. The community approves all the transactions of the decentralised crypto, and there is no regulatory authority over transactions.
Crypto’s like Bitcoin and Eutherium prove that the risk and desire to move toward digitising money is stronger than ever. Through the Bitcoin crash, there were still many adopters that didn’t let go of their digital coins. Billionaires were made, and millions were lost amidst the instability fluctuations of all the cryptocurrencies — none more notable than Bitcoin the Godfather of Cryptocurrency. As we reflect on the closing hours of 2019, investors in Bitcoin, although disappointed at the year-end results, are still remarkably optimistic as 2020 dawned. The allure of having a decentralised community drew in a portion of believers who have grown weary of the big banks controlling their income and the governments taxing it. To recap on what exactly cryptocurrencies are, here is an accurate explanation.
Cryptocurrencies are algorithm powered currencies used as tokens in select online communities and backed by specific technologies, assets or projects. They are mostly used in peer-to-peer payments but are also being used as payment for physical goods and services.
Japan was one of the first places to accept Bitcoin in exchange for goods and services. In 2017, it was recorded that over 5000 stores in Japan accepted Bitcoin as payment. The Japanese airline “Peach” was the first airline to accept Bitcoin as payment. Japanese businesses were responding to the high-spending Chinese tourists that had purchased Bitcoins and are receiving the cryptocurrency through intermediary payment systems.
Why is there such fervent belief in cryptocurrencies? Well, places like Venezuela endured the highest inflation rate in the world before 2016. The IMF estimated inflation in Venezuela to be between 186% and 720%, in the three years prior to 2016 and that was enough to spark interest in Bitcoin. Venezuela set volume purchasing records of Bitcoin throughout 2016. The low price of electricity in Venezuela thrust Bitcoin mining operations into the spotlight too. The other country of note to take up Bitcoin and saw it as lifeline was Zimbabwe. As the Zimbabwean economy took another nosedive in July 2019, the country’s economy continues to struggle. It has been struggling for the last 18 years. The Bitcoin cryptocurrency is trading rapidly in Zimbabwe after President Emmerson Mnangagwa’s government banned the use of foreign currencies for settlement of local transactions. These facts teach us that when there are political turmoils and instabilities, governments deprive their people of liberties and rights, the people become rebellious and look to alternative solutions. The cryptocurrency Bitcoin is the current solution adopted by these two economies, but many poorer nations are taking note.
To that end, governments around the world have been working on fast-tracking their versions of digital currencies into the mix as the lines around what cryptocurrencies are versus digital currencies are still very blurred to the vast majority of people.
The end of 2019 provided a window of activity into how seriously the Asian economies are acting on implementing their digital currencies backed by their independent central banks. Singapore, South Korea and China have been active in working on their legislation for digital currency rollouts. Dubai has also been paying close attention to the digital framework of money and responded by announcing its plans. The deal between emcredit, a subsidiary of the Dubai Department of Economic Development, blockchain payment provider Pundi X, and its partner Ebooc Fintech & Loyalty Labs LLC will facilitate point of sale (PoS) payments in emcredit’s emcash currency. Significant steps are being taken to evolve the current forms of money to the future of money as it happened centuries ago when we used to barter trade, then moved to coins and minerals and finally paper notes. The next evolution has arrived, and there is one major player who is poised to tip the balance of power by sheer numbers, governance, authority, control and tactics.
China is the biggest threat to the current world of money, as it plans to launch its Digital Yuan in 2020. Bloomberg stated that the crypto yuan, which may be on offer in 2020, will be fully backed by the central bank of the world’s second-largest economy, drawing its value from the Chinese state’s ability to impose taxes in perpetuity. Other national authorities are bound to embrace this powerful idea.
The shifting tide begs the question of what will happen to all other currencies if China and other nations begin to switch over to digital money? Will economics change, will trade wars increase and cause deeper rifts of the divide between nations? In the quest for power and control who are the losers? How will the U.S. respond, what do smaller countries do in the wake of imminent uncertainty? There are many unanswered questions, but the fundamentals remain. The world is so interconnected and dependent on trade that there has to be negotiation on all fronts.
Free trade agreements will incorporate the new forms of money as nations decide on what the new benchmark currency will be. For more on the world of business and what it means to you, stay in touch with Strategy Hubb as we connect the dots. We enable you to make better decisions and develop the right strategies to compete in a complex world of change.
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