How Will Cryptocurrency Change The Existing Global Economic Order?
Cryptocurrency can disrupt our lives in a way similar to how mobile phones and the internet did. Initially, it was thought that mobile phones would be used only to compensate for the physical gap between people by allowing them to communicate across thousands of kilometers. But as it evolved, it transformed not just how we communicate but also every aspect of human life – from banking to browsing. Similarly, the underlying technology for cryptocurrency is still evolving and not many are sure where it will lead to. However, one thing that appears certain is that the financial system will not be the same again.
Some argue that cryptocurrency will negatively impact the global economy, particularly the developing ones, as it removes the need for intermediaries like banks. They primarily refer to its newness and lack of trust among a large part of users. They also cite the extreme volatility crypto coins show regularly and the lack of regulating authority. Others say the lack of regulation makes it democratic. They also argue cryptocurrency supports financial inclusion in poor countries at an unmatched rate because of increased transparency during transactions owing to its decentralised ledger system, low cost of the transaction, and its ability to beat inflation if someone decides to hold it as a store of value.
Irrespective of the arguments, El Salvador became the first country in the world in September 2021 to adopt Bitcoin, the largest cryptocurrency, as a legal tender alongside the US dollar. It must have seen some merit in its usage. Also, many other countries are either developing or thinking of developing their own cryptocurrency, called the Central bank Digital Currency (CBDC).
Corporates largely like cryptocurrency as it reduces regulatory oversight and helps them do business. Most users find it easy to transact and trade. But the real issue may arise with the transition. How quickly – or slowly – we are able to move to adapt to this new technology-driven way of trading. How smoothly we make the transition will decide whether cryptocurrency could benefit the global economy or crash it. But it will surely change the existing system.