Since the invention of Bitcoin in 2009 by the mysterious Satoshi Nakamoto, cryptocurrencies have risen to become one of the most emergent and controversial innovations in modern history. Bitcoin paved the way for the exploration of fully digital money that could not be controlled by financial institutions and large governments. It also inspired the development of thousands of other altcoins, thus changing the world of finance forever. As more people gravitate to the prospect of wealth generation through a fully digital economy, it is worth exploring the various facets of cryptocurrency – from its immense potential to its disruptive nature.
A World of Opportunity
One of the most exciting possibilities brought about by cryptocurrency is financial inclusion.
The current global financial system and its payment railways are governed by centralized institutions that come with inherent limitations. For example, people living in remote areas often need to travel long distances in order to do a simple bank transaction such as opening a bank account, making a deposit, or withdrawing cash. This is often exacerbated by the fact that most banking institutions require paperwork and documentation that are not always readily available to the unbanked or underbanked population.
With cryptocurrency and its expanding universe of decentralized applications, entire economic ecosystems can be created without the need for banks and intermediaries. Unbanked and underbanked individuals can create their own crypto wallets without the need to travel to a bank, fill out paperwork, or submit ID or government documents. Businesses can integrate crypto payment into their systems to accept virtually any cryptocurrency as payment for products or services.
Cryptocurrency and blockchain can even allow people who have historically suffered from restriction and exclusion from the global banking system to finally participate in financial transactions. This democratization of financial services and solutions can empower individuals and encourage economic growth in underserved or unbanked communities.
Additionally, cryptocurrency can serve as an alternative means to finance campaigns, initiatives, and projects that people wish to support. Today, non-profit organizations and humanitarian movements are embracing the role of cryptocurrency in fundraising to support humanitarian efforts around the world. Exciting blockchain projects and ventures have also found an avenue to democratize venture capital opportunities through Initial Coin Offerings and Security Token Offerings. Cryptocurrency has also opened new channels for people working abroad to send remittances back to their home country, without needing to pay hefty remittance fees.
Disrupting Traditional Finance
On the other hand, cryptocurrency has also disrupted the traditional financial system in the sense that it can operate without the regulatory oversight and control of traditional financial systems such as banks. This disruption to the status quo challenges established norms of financial transactions, potentially undermining the power structures of centralized institutions.
The wider adoption of cryptocurrency has eventually led to governments exploring the possibility of establishing their own central bank digital currencies or CBDCs, issued directly by national monetary institutions. The introduction of CBDCs would run contrary to the philosophy of cryptocurrency as a fully free and decentralized financial system.
As traditional finance, governments, economists, and lawmakers seek to better understand crypto, more regulatory controls are likely to emerge that will seek to rein in the industry. However, it is worth considering whether there is a need to regulate and control a financial system that can allow markets to operate purely based on the principles of supply and demand.