Since Bitcoin’s debut in 2009, cryptocurrencies have had both blatant and subtle effects on the economy. Cryptocurrency, the digital or virtual money in the form of tokens or coins, has been around for eleven years and has firmly established itself as a legitimate currency and investment option, with its economic influence being felt in a variety of sectors across national and worldwide communities. There are over 2,000 different cryptocurrencies as of January 2020, and roughly 36.5 million people in the United States have some cryptocurrency in their possession.
Hundreds of billions of dollars flowed into cryptocurrency in 2017, further cementing it as a viable asset to invest in, even if cryptocurrency hasn’t affected major areas of the economy like the stock market. As a matter of fact, cryptocurrency has been dubbed “digital gold” by industry insiders due to its ability to maintain its value in the face of inflation and deflation. As bitcoin is still in its infancy, its economic impact is likely to be a topic of discussion among economists and investors for the foreseeable future. Some of the ways that bitcoin has affected the economy are listed below.
Global financial inclusion made possible by cryptocurrency:
Global financial inclusion is made possible by cryptocurrencies, which can be quickly accessed and used to purchase resources and obtain financial services. As a result, it hastens the growth of economies throughout the world. Decentralization means that no single person or organization has complete control over the system. Therefore, in contrast to the conventional financial system, it is immune to abuse by either businesses or individuals. Because of this, there is less chance of fraud occurring. In a nutshell, cryptocurrencies aid emerging economies because they can help them become more economically and socially stable.
The emergence of blockchain technology has made it more simpler for entrepreneurs to gain access to funding since they provide them greater control. The expansion of economic activity is a result of all of these factors. The cryptocurrency-based economy is evolving toward universal, open access that transcends borders and socioeconomic level. Over 1.7 billion individuals worldwide do not have access to traditional banking services and might benefit greatly from the global financial inclusion made possible by cryptocurrencies. The yearly GDP of developing economies is predicted to increase by $3.7 trillion.
Energy data management and commodities trade are two other industries where blockchain technologies are being implemented. The real-time speed, efficiency, and transparency may all be improved with the use of blockchain technology. Since this is the case, blockchain will speed up the transfer time. Blockchain technology facilitates the recording and settlement of energy trading transactions without the need for a third party. There is no need for peacemaking because everyone is on the same page.
Economic Impact of Cryptocurrencies.
Even while cryptocurrency transaction volumes and market prices are on the rise, their impact on monetary policy is still negligible at this time. Cryptocurrencies can only grow to the point where they can impact the financial markets if they are accepted as an alternative to the government-issued money.
Although one nation has already made the switch to bitcoin as its official currency. When it comes to international transactions, El Salvador is the pioneer. Bitcoin is accepted everywhere in El Salvador. Since the use of cryptocurrencies differs from state to state, however, other nations are neutral on the issue and cannot enact a rule on them.
The use of cryptocurrencies has increased in popularity for financial transactions. The goal is to eliminate the need for centralized clearing houses, intermediate banks, or custodian banks in financial transactions by using decentralized cryptocurrencies. In contrast to conventional financial assets, those obtained with a cryptocurrency cannot be purchased with fiat cash from conventional financial institutions. It’s also not the same as putting money into virtual currencies. Taxing cryptocurrencies is a positive thing since it means people may make financial investments in bitcoin with the backing of the government.