Inflation is one of the difficulties that could lead citizens to prefer using cryptocurrencies to save their money and, even, as a form of payment
Every month, new crypto ATMs are installed in the world, more companies accept cryptoactives as a form of payment and more people are interested in having these digital assets to save money.
In only ten years more, by 2030, the demand for alternative currencies will rise, according to recent research from The Deutsche Bank. The financial institution also considers that digital currencies eventually will replace cash and, in this way, it will also replace traditional money.
Cryptocurrencies like Bitcoin, which was the first cryptocurrency of the world, have reached important places and now are part of the current economy.
The British Virgin Islands has announced that it is developing a digital currency called BVI-LIFE. This project is possible thanks to the collaboration of the LifeLabs startup. The main purpose is to help grow the local FinTech sector and, as a way to transmit more confidence to users, the cryptoactive will be anchored to the US dollar.
Even countries like France and China could launch national cryptocurrencies. In fact, Venezuela has its national crypto, “Petro”.
For that reason, Deutsche Bank hopes that, once cryptocurrencies overcome the most difficult obstacles such as the adoption and expansion, they could obtain more space in the market and consolidate their value.
Fiat System is Currently Fragile
As happens in Venezuela, a South American country that faces strong inflation despite being a nation rich in oil, citizens could resort to the use of cryptocurrencies as a way to avoid the devaluation of their money.
About the possible future for cryptoactives and other fields, Jim Reid, Deutsche Bank strategist presented a report with 24 alternative ideas for the next 10 years. In that report, cryptoactives are very present.
“The forces that have held the current fiat system together now look fragile and they could unravel in the 2020s. If so, that will start to lead to a backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar”, the expert wrote.
Reid explained that the current fiat system has encountered challenges in recent years. He thinks that anonymity could drive more individuals to use new alternatives like digital currencies.
Eventually, inflation could become more and more embedded, according to Reid, and doubts regarding state-sponsored money may increase.
“When labor costs rise at the margin rather than fall, there will likely be a more difficult environment for policy makers. And where politicians are worried about elections, it is likely that inflation will be the casualty”.
Challenges to Overcome
But, according to Reid, cryptocurrencies need to overcome three major challenges to gain more acceptance. These include legitimacy and stability in their value. This will boost, even more, the crypto market since people and governments could feel more confident in cryptoactives.
The dependence on electricity is another aspect that cryptocurrencies should overcome. If these assets find another mechanism to arise, excessive consumption of electric power can be avoided.
“As that occurs, the line between cryptocurrencies, financial institutions, and public and private sectors may become blurred”, Reid concluded.
By María Rodríguez