The global central banks’, such as the IMF, decision to lower interest rates and print more money to tackle the impact of COVID-19 pandemic on the world economy will eventually turn positive for the cryptocurrency industry. Because such a stimulus could weaken fiat currencies paving the way for virtual currencies to exceed most other assets.
Benefits of Cryptocurrencies over Fiat Currencies
The blockchain space is inherently free of biological viruses, given the fact it is digital. So, cryptocurrencies do not require the physical handling of fiat currencies that often act as germ carriers. Also, since virtual currencies function remotely, blockchain companies can contribute to the economy without any hindrance.
Also, cryptocurrencies have no political risk since governments do not control them. They remain solid even during big problems in a region or even a country. Only when the economy worsens on a global scale, do cryptocurrencies lose their value.
With cryptocurrencies, money is always safe because no one can devalue them by printing more; the more their usage, the better their value.
However, also remember that crypto-assets do face the risk of a considerable decline in value in the face of a plummeting mainstream financial market. When traditional markets fall, crypto prices are affected as investors tilt toward more stable assets.
A New Digital Future: Why Use Virtual currencies
- No fraud: Since cryptocurrencies are digital, they cannot be reversed arbitrarily or counterfeited.
- Lower fees: Crypto exchanges are usually not charged except for when a third party is involved.
- Anonymity: Each virtual currency transaction is encrypted. And, cryptocurrency holders send only what they want to the recipient with no additional information.
- Quick Settlements: Bitcoin contracts take very little time and charge less to complete a transfer.
- And most importantly, it is the only e-cash system owned by individuals.
The Global Regulation of Cryptocurrency
How do countries view cryptocurrencies? Are they treated as money as in Germany and Japan, or are they unregulated, speculative assets as in Denmark and Mexico? Consider the following table.
|Country||Cryptocurrencies||Cryptocurrency Exchanges||Future Regulation|
|United States||Not legal tender||Regulation varies by state||FSOC working group to analyze the crypto market|
|Canada||Not legal tender||Requires registration with FinTRAC after June 1, 2020||No additional legislation for now|
|India||Not legal tender||Illegal||Considering blanket ban on cryptocurrencies|
|China||Not legal tender||Illegal||No intention to lift the ban on cryptocurrencies in the near future|
|Switzerland||Accepted as payment in certain contexts||Regulated by the Swiss Federal Tax Administration(SFTA)||Considering legislation to encourage an innovative blockchain technology|
|Australia||Treated as property||Requires registration with AUSTRAC||The ASIC, in May 2019, updated regulatory requirements for crypto trading.|
This is an exhaustive list. Only a selective few are mentioned here. Singapore, the United Kingdom, South Korea, Malta, Estonia, Gibraltar, and Luxembourg do not consider cryptocurrencies as legal tender and have their respective laws to monitor and regulate the cryptocurrency industry. In Latin American countries and EU member-states, cryptocurrencies are legal, and control legislations vary according to the region.
Well, it is unclear what impact the cryptocurrency industry will have on the world economy over the long haul. For now, the cryptocurrency market just needs to assess its current situation to stay afloat until the COVID-19 pandemic is bogged down.