The introduction of cryptocurrency has revolutionized the financial market, creating a vast infrastructure that has attracted billions of dollars in investment, despite lacking a physical counterpart. However, this is just the beginning, and digital currencies are likely to play a significant role in economic history multiple times.
Although there are stringent requirements for this to happen, cryptocurrencies also have their weaknesses. Therefore, it’s worth examining whether crypto projects can replace the traditional banking system, or if it’s just a far-fetched idealistic notion.
Current crypto position in global finance
Currently, traditional financial tools remain prevalent in most areas, and paying for purchases with crypto funds at stores is still impossible due to insufficient infrastructure. While transfers to bank cards are possible, the corporate sector has limited involvement in the crypto market, and people continue to use conventional bank loans and fiat currency for their salaries.
Despite this, the enormous potential for crypto development lies in its undeniable advantages, and it’s likely to grow in the future.
Decentralization eliminates boundaries for financial transactions and customer service, regardless of their location. This sets the crypto market apart from the traditional one, where companies are often constrained by local regulations.
Crypto operations are nearly instantaneous and can cost mere cents for transfers worth billions of dollars, all while maintaining safety. As a result, there is a growing population that uses cryptocurrencies to store their savings, as it allows them to manage their money without the restrictions that traditional banking may impose.
Although complete anonymity is not yet achievable, it remains both a strength and a weakness of cryptocurrencies. While it enables individuals to maintain confidentiality in their transactions, it can also be exploited by organizations seeking to fund illegal activities. Regulations will become more stringent, and companies will be required to comply, but there will still be a level of ambiguity that may make tracking certain actions difficult.
Such a much-needed regulation
It took the crypto market a decade to establish itself, and during its early stages, it remained relatively small, drawing little regulatory attention. However, as the market expanded, concerns began to arise. It became possible for almost anyone to create a website, pose as a crypto bank, and abscond with the funds.
Recently, Luna, Celsius, and FTX experienced a crash, resulting in the loss of over $100 billion. This development demonstrated that cryptocurrencies are no longer just playthings and that regulators must keep a close eye on assets, balances, service provisions, and how companies utilize them across borders. Centralized services operate with legal entities and standardized products within specific regions, whereas decentralized services may exist without a legal entity.
Over the next three to four years, the crypto industry will be subject to greater regulation. Some companies may exit the market, leaving the remaining ones stronger and subject to standardized requirements for opening accounts and declaring cryptocurrencies. While the decentralized aspect of the market may experience slower changes due to its smaller size, progress will be made.
Currently, the lack of regulation creates doubts and prejudices, but as companies and individuals adapt to the new regulatory environment, they will be able to legally hold, trade, sell and issue cryptocurrencies in a clear framework.
Skepticism and how to beat it
While many individuals see cryptocurrencies as a means of generating revenue, the market extends beyond tokens. In terms of cryptocurrencies, they can be classified as follows:
Stablecoins are cryptocurrencies that are tied to the value of a fiat currency, such as the euro, dollar, or yen. On the other hand, some cryptocurrencies are linked to the tokenomics of specific products, which is similar to a company going public with the value of shares tied to financial and production performance. Another type of digital asset is tokenized assets, where real-world objects such as art, metals, and properties are represented as tokens. This presents a new opportunity for centralized sales of previously indivisible or unsellable assets. Improved regulation can help dispel skepticism surrounding these crypto products, leading to greater trust in the market as a whole.
Expected changes in the coming decade
In the next 10-15 years, it’s highly likely that cryptocurrencies will have a significant impact on most parts of the world, potentially in the following ways:
- International transactions may become more convenient, transparent, and less expensive due to the high reliability of cryptocurrencies through blockchain technology. While many other technologies are being created for more safety, the possibility of rolling back operations has already prevented many adverse events.
- Over 20 countries have already begun producing central bank digital currencies (CBDCs) to expand control for states and banks worldwide. While it’s unclear whether this is good or bad for ordinary people, most entities will likely switch to using CBDC and blockchain for transactions.
- As crypto technologies rapidly develop, companies worldwide can provide financial services and become financial institutions. However, these companies currently don’t offer lending, deposits, various crypto accounts, or transactions. Despite the millions or even tens of millions of users on these platforms, only 3-4% of the population currently uses cryptocurrencies. Therefore, banks may adopt crypto technologies or exit the market.
The crypto market’s active audience is rapidly expanding, and its development cannot be stopped by a single button or “reverse gear.” Nevertheless, it’s unrealistic to expect that regular money will disappear in just a few years. However, it’s highly possible that cryptocurrencies will become increasingly prevalent among our children in the future.