The past 2 years have been an extraordinarily exciting time for cryptocurrencies. Bitcoin (BTC) has been propelled into the limelight as the dominant cryptocurrency. Ethereum (ETH) and XRP have been following close behind with prices also hitting record highs.
It is clear that the market for cryptocurrencies will only continue heating up. The incoming Coinbase IPO will only serve to further solidify crypto’s position as a mainstream asset.
While digital currencies lack any tangible value, advancements in fintech and the rise of cashless payments has rendered all of this a moot point. Being able to allow the near instantaneous transfer of funds at a low cost makes crypto an excellent medium of exchange.
However, all of this excitement is bound to rock the boat. The decentralized nature of cryptocurrency coupled with its rising popularity has caused a degree of consternation in both governments and financial bodies.
U.S Treasury Secretary Janet Yallen has raised concerns regarding cryptocurrency’s usage as a vehicle for illegal transactions such as money laundering. Additionally, banks such as HSBC have banned their customers from trading in digital assets or companies affiliated with digital assets.
However, there are some crypto friendly banks that have started to accept cryptocurrencies. Click here to find out more: https://blog.tezro.com/best-crypto-friendly-banks/
So what does the future exactly hold for cryptocurrencies? Are we headed for a brave new age or will governments step in and cause the digital asset bubble to burst?
Let’s take a look:
- Cryptocurrencies may assume an even larger role
Dedicated crypto enthusiasts have long stated that digital assets will complement or even replace fiat currencies outright in the near future.
They have often cited the rise of digitization, shifting mindsets, and rising globalization as the reason for this. As we’ve seen in recent times, the demand for cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and XRP as investment assets has been increasing.
From the ease in which cash can be transferred to its ability to circumvent government regulation, it’s easy to see why businesses around the world have come around to accepting cryptocurrency payments.
The outbreak of COVID-19 has also accelerated the acceptance of digital wallets and cashless payment technology. A state of affairs which will only serve to further accelerate the integration of cryptocurrencies in daily life.
- Governments will likely call for tighter regulation
As was mentioned earlier, governments and financial bodies around the world have expressed concern over the rising acceptance of cryptocurrencies.
Being fully decentralized and independent of the traditional financial system, cryptocurrencies allow individuals to live beyond the control of governments and banks. Naturally upsetting this status quo will lead to a push to restrict or even control the usage of cryptocurrencies.
Digital wallet providers may be compelled to reveal the identities of their users or come under regulation. All of which is done to prevent capital flight and the usage of cryptocurrencies to launder funds or finance illicit activities.
Because of this, we may see a drop in popularity of cryptocurrencies as hardcore crypto enthusiasts move away.
- A focus on privacy-based cryptocurrencies
One of the main reasons why cryptocurrencies have exploded in popularity can be attributed to its decentralized nature.
During its early years, Bitcoin was favored by deep web users for the degree of pseudo anonymity that it offered. Being able to operate outside of the financial system allowed users to purchase and sell illegal items/services whilst keeping their identities protected.
However, since it has become a part of the mainstream, Bitcoin has fallen out of favor as a suitable medium of exchange. This is because the identities of senders and recipients can still be tracked and traced – albeit with some difficulty.
To counteract this, developers have begun introducing privacy-focused cryptocurrencies such as Dash and Monero that can be used to facilitate anonymous transactions. With greater distrust of the government and concerns about privacy, we will likely see the crypto enthusiasts demanding greater and greater protection for their data.
These are 3 of the most likely predictions that we’ll see in either 2021 or 2022. Increased rates of acceptance for cryptocurrencies will push governments to clamp down on and implement regulations. All of which will lead to a call for even greater privacy and less government intervention.