It is broadly accepted that cryptocurrency is an aggressively expanding network paving the way for the conventional monetary system. In 2018, the number of cryptocurrencies was nearly 50 million, and the figure reached billions in four years. The pioneer of cryptocurrency networks has gotten the most attention so far. However, if you are looking for a secured platform with a low broker fee, then https://bit-iq.io/ will be your best option.
Private and government institutions tend to be exhilarated by the notion of cryptocurrency and are seeking to adopt this modern monetary system. However, the practical application of cryptocurrency relies on the existence of institutions that support fiat currency. Therefore, using cryptocurrency alone is not enough to make it a successful business. Institutional investors must start to support its use as well.
Still, although many exciting projects embrace cryptocurrency as their potential future in the finance industry, some people are not interested in this concept. There is significant attention to the Ethereum network. Understanding how this network can be more successful in a more natural form is suggested: bridging cryptocurrencies with a fiat money system. Let’s look at why cryptocurrency has a bright future in the financial segment.
The outline of decentralised finance
The disruptive potential of a cryptocurrency network is due to its capacity to offer users the platform free from any central authority such as the government or banks. It is commonly known that cryptocurrency is run based on a decentralised system.
The decentralisation process refers to the way of generating cryptocurrency, which eliminates any need for a central authority. Blockchain technology thus eliminates any regulatory oversight over digital assets, which can be considered an immensely appealing factor for institutional investors and government agencies.
Since no centralised bodies control this system, it is more secure, private, and flexible, with no favoritism in creating currencies and tokens. Therefore, digital currencies will sustain to introduce variations bound to make them more secure, stable, and reliable for investors.
Being decentralised, a cryptocurrency network is advantageous in exposing users to a state of total transparency. Furthermore, because everything is written in code with the verification process involved in the transaction, there will be no space for manipulation from any third-party entities.
Should banks and governments support cryptocurrency?
Banking professionals are already embracing the idea of cryptocurrency as they have understood that blockchain technology is more cost-effective and efficient than conventional reconciliation methods. Banks can benefit by simplifying cross-border payments and settlements, which are time-consuming and costly.
Also, the valuable information about each transaction stored in the official ledgers can be easily viewed by regulators. However, despite all these benefits, banks have to think twice before adopting a decentralised network as a fully transactional system.
For instance, in August 2018, two central banks were reported to have suspended Blockchain startups’ use of the platform and issued a new credit card based on Bitcoin (BTC). On the other hand, Japan’s largest bank Mitsubishi UFJ Financial Group (MUFG), tested blockchain-based remittances between Singapore and Japan. In addition, European Central banks are embracing this disruptive technology by organising workshops and consulting on possible applications.
As cryptocurrency utilisation is expanding, the need for regulatory oversight keeps growing. It is known that cryptocurrency technology has many advantages over the conventional monetary system.
However, the decentralised nature of underlying blockchain technology also comes with several challenges for the cryptocurrency world, such as fraud and illegal activities. Besides, there are many concerns about how the crypto industry can benefit from the support from government and regulatory bodies.
Therefore, it is advised to maintain a balance between a centralised system and the decentralised nature of blockchain technology by making proper regulations and laws to support the use of cryptocurrency in the whole financial ecosystem.
Banking advantages of cryptocurrencies
The most significant factor that banks and government agencies are concerned about is whether cryptocurrency networks can be efficient in their working style. There will not be any third-party interference in the transaction process, making it more appealing for institutional investors and financial institutions.
A recent study by Crypto Finance Conference reported that 70% of participants have been investing in cryptocurrency, while 66% of the respondents use cryptocurrency to make payments online. In addition, digital asset banking application is also gaining popularity as 50% of beginners use crypto banking application rather than conventional bank accounts to invest digital assets.
Moreover, financial experts suggest that increased crypto adoption can help control the inflation rate and mitigate the risk of market downturns. A conventional form of banking is unable to give investors such benefits. Therefore, it will undoubtedly play a significant role in increasing interest in using cryptocurrency as a medium of exchange.
The most significant factor through which cryptocurrency banks and governments can benefit the most is embracing the technology of blockchain that fundamentally operates under a decentralised network. However, there are many challenges among regulators and banks in integrating the decentralised nature of blockchain technology.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.