Cryptocurrencies are now a global phenomenon and are routinely making headlines for good or bad reasons. Investors, businesses, and individuals can no longer afford to shut their eyes to the cryptos. Cryptocurrencies are here to stay despite the unpredictability of their prices.
As per analysts, the global crypto market will more than triple by 2030. The number of crypto investors has continuously been on the rise. But the recent trends have been highly explosive, as more and more businesses are now accepting payments in cryptocurrencies.
Benefits of Cryptocurrencies:
Cryptocurrencies have established themselves as uniquely decentralized financial assets. They offer a bundle of benefits to both individuals and companies. The benefits include:
Cryptos are Mobile Payment Friendly
Crypto wallets are accessible from mobile phones anywhere and anytime. You can send and receive money from one digital wallet to the other by using your smartphones.
Cryptocurrencies and crypto markets are accessible 24/7. You don’t need any bank account to get the cryptos. Just use your smartphone or laptop and make a transaction any time.
Cryptocurrency networks are peer-to-peer. This means that people can transact directly with one another, and there is no third-party involved.
Reduced Transaction Time
Global crypto transactions are faster than traditional wire transfers. Wire transfers take about half a day to move money from one place to another. Cryptocurrencies make this possible within minutes only.
Lower Processing Cost
Cryptos are also used to transfer money across borders. This involves a transaction fee. But cryptocurrencies help reduce this processing cost because there is no third party involved in verifying transactions.
Privacy of Transactions
Cryptocurrency transactions are more secure and private than other modes of electronic transactions. This is because the blockchain ledger uses different mathematical puzzles, which are difficult to decode.
No Dependency on Banks and Governments
Cryptocurrencies are decentralized financial assets and are not controlled by any central authority. So these remain monopoly free, unlike the regular currencies.
Challenges to Cryptocurrencies:
Despite the phenomenal rise in their values and global popularity, cryptocurrencies are still facing many challenges. They have come under enhanced scrutiny and pressure from international governments and regulators. As there’s no central authority to regulate cryptocurrencies, different governments, therefore, perceive cryptos differently. Some challenges are listed as under:
Delayed Regulations / Regulatory Framework by Policymakers
Policymakers and governments may drag their feet to frame uniform regulations in the foreseeable future. This will lead to a definite delay in the universal acceptability of cryptocurrencies for some time.
Inconsistent Regulations Across the World
Non-consensus on the regulations by international governments is another challenge faced by the cryptos.
Cybersecurity Issues/Data Breach, and Technology Failures
Cryptocurrencies are prone to serious security and data breach issues. These issues can undermine the public trust in virtual currencies.
Price Volatility and Unpredictability
This is another enormous challenge confronted by cryptocurrencies. Their prices are extremely volatile and unpredictable. Hence, retailers and consumers may hesitate in accepting cryptos as a mode of payment.
Risks of Illegal Activities such as Money Laundering and Terrorist Financing
Due to a lack of universal regulations, cryptocurrencies may become a conduit for the illegal movement of funds. Terrorists and money launderers may use digital currencies to fund their illegal activities.
People also show concerns regarding the environmental impact of cryptocurrencies. This relates to mining pollution and excessive energy consumption. Cryptocurrency mining requires intensive computational power and electricity input.
The above challenges may delay the revolution of digital currencies for some years. However, cryptocurrencies are the future money. Thus, no government or regulatory authority can stop cryptos from gaining traction in the long term.
The cryptocurrency community must push the global governments for the early adoption of a universal regulatory framework. This will ensure the growth of the digital currency in the near future.
The crypto future also depends on its wider adoption as a means of payment by large commercial organizations. To achieve this end, the issues of price volatility, data security, and the illegal use of digital money must be addressed.