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Is Cryptocurrency The Future of Money? What Americans Believe

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Source: Atlantic Council

The rapid rising of Bitcoin and other crypto assets has caused new challenges for central banks and some governments.

Since Bitcoin’s emergence in 2009, the popularity of cryptocurrency has skyrocketed. At present, cryptocurrencies are worth more than $1 trillion collectively.

However, the market is quite volatile, although critics say it is due to no proper regulation. Also, according to critics, the crypto market empowers terrorist groups, criminal organizations, and rogue States.

Various crypto firms and protocols failed, including FTX, one of the industry’s heavyweights, which led to the loss of billions of dollars.

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That notwithstanding, various governments are researching ways to use the technology that powers cryptocurrencies via investing in their central bank digital currencies (CBDC).

On the other hand, some governments placed a total ban or limited the range of crypto usage. Up to 119 countries, including the US, are contemplating introducing their CBDCs (central bank digital currencies) to participate in the crypto boom.

This brings us to the question, is crypto the future of money? Read down let’s see what Americans and others say about it.

How Americans See Crypto

MarketWatch‘s recent Pew Research Center survey in April revealed that 90% of US adults have heard about crypto assets.

In February 2023, Coinbase commissioned a survey that Morning Consult conducted on over 2,000 American adults. The survey centered on people’s perceptions of cryptocurrency and the trending financial system.

Here are some of the outcomes of the survey:

  • 80% of Americans believe there is a twist in the global financial system, with more favoritism toward powerful interests.
  • 67% of Americans think the financial system could function better with key changes or a complete overhaul.
  • 20% of Americans own digital assets. The ownership is more among the younger aged ones and the black Americans. Also, the survey revealed that despite the turbulence in the crypto space in 2022, there had been no significant change in crypto ownership among Americans since the beginning of 2022.
  • 76% of crypto owners believe blockchain and crypto assets are the future.
  • Crypto ownership distribution is Independents (22%), Democrats (22%), and Republicans (18%). This replicates that virtual assets are a rare bipartisan issue in the country.

Conclusively, many desire to overhaul and upgrade the financial system. Most participants believed crypto assets would play a powerful role in creating financial solutions.

Survey Reports and Methodology

On November 1, 2022, the world’s largest digital currency asset manager, Grayscale, announced the findings regarding a new national assessment. The assessment is carried out on behalf of Grayscale by the Harris Poll.

The survey was conducted online in the US from October 6 to October 11, 2022. The participants include 2,029 adults between the age of 18 and above. It was conducted through “Harris On Demand omnibus product”.

The developers accessed the data according to the following;

  • age,
  • race/ethnicity,
  • gender,
  • education,
  • region,
  • marital status
  • household size
  • household income
  • employment
  • propensity to stay online

The survey respondents came from those who agreed to partake in the Harris Poll Surveys.

The survey examined how Americans regard the condition of the economy and crypto against the circumstances of the 2022 US election.

The Harris Poll and Grayscale Investments survey shows that Republicans and Democrats accept crypto as the future of money. The survey disclosed that;

  • There is a chance for financial advisors to welcome young and various investors’ intense zeal for cryptocurrency.
  • There is an understandable wide range of bipartisan support for considerable action in Washington to strengthen and clarify crypto regulations and rules.
  • Above 53% of Americans surveyed accept that the future of finance is cryptocurrency. Among the people that are of this opinion, 52% are Republicans while 59% are Democrats. 44% of Americans signified that they expect to have cryptocurrency as one of their future investment portfolios.

In a statement, Grayscale CEO, Michael Sonnenshein, said that “as the US midterm election draws near, the voters are contemplating the joining of traditional finance, cryptocurrency, and the state of the economy”.

The latest survey strengthens that cryptocurrency creates mainstream engagement and investor interest”.

Sonnenshein said that since the Americans are very considerate of the future of their finance, regulators, and policymakers are opportune to safeguard the investors via greater regulatory guidance and clarity. At the same time, they should allow market participants such as; financial advisors to allow access well-informed cryptocurrency offerings”.

 

What Other Countries Believe about Crypto as the Future of Money

Although Americans favor cryptocurrency becoming the future of money, some countries view it as a threat.

For instance, China, which was once the world’s Bitcoin mining hub, has an aggressive move to limit cryptocurrency. In September 2021, the Chinese government banned cryptocurrency transactions and mining. As a result of this ban, some crypto prices failed right after as aftermath.

According to the United States Library of Congress, there are additional 8 countries that have also banned cryptos. They are;

  • Tunisia
  • Nepal
  • Algeria
  • Morocco
  • Iraq
  • Bangladesh
  • Egypt

Moreover, many other countries are seeking to limit the acquisition of digital assets.

Top Crypto-Friendly Countries

As the crypto industry gained more adoption and acceptance for several use cases, the popularity of digital assets spiked. This growth opened the way for some countries to embrace the growing trend, putting up measures and rules for crypto usage tokens and creating crypto-friendly environments.

Here are some crypto-friendly countries.

·       El Salvador

When it comes to crypto adoption, El Salvador takes the lead among the top crypto-friendly countries. The country was the first to legalize the use of cryptocurrency and still maintains crypto-friendly regulations.

In 2021, the Central American country declared Bitcoin as a legal tender. This status allows citizens to pay for goods and services with BTC tokens. Also, it launched a special wallet, Chivo Wallet as the official wallet for Bitcoin and dollars allowing Salvadorans to send or receive Bitcoin and dollars.

Moreover, El Salvador takes no tax on crypto-related activities or profits from investments and trades on crypto. The country plans to develop the first Bitcoin City in the world.

·       Malta

Malta has open arms for crypto activities within the country. It offers a more conducive environment and regulations for crypto-related firms to operate. It sees crypto assets as a great store of value and a medium of exchange. So, the country allows the use of crypto tokens for trading.

Additionally, the country passed some bills to support seamless crypto regulatory measures. These include Malta Digital Innovation Authority Act, Innovative Technology Arrangements and Service Act, and Virtual Financial Asset Act.

However, income tax on crypto could get up to 35% in Malta, depending on your income status and tax bracket.

·       Canada

Canada is one of the crypto-friendly countries with a growing market potential for crypto businesses. It offers the right environment where most citizens can explore the profits in crypto trades and investments. Using crypto assets to trade and pay for goods and services in Canada is legal.

However, Canada has set some regulations to control risks associated with using crypto tokens and protect investors. These include anti-money laundering rules and others.

According to Canada Revenue Agency (CRA), there’s an income tax on just half the gains from crypto activities.

·       Portugal

Portugal is among the top crypto-friendly countries presently in the world. It takes no tax on capital gain on crypto trades, which has boosted the region as a growing crypto hub for more crypto traders. However, the country maintains taxes on income in crypto activities.

Generally, Portugal has a high enthusiasm for crypto. In 2020, the country launched its Digital Transitional Action Plan, which will facilitate its growth in digitalization. This move pushed the country forward as the fertile ground for crypto-related activities.

·       Switzerland

Switzerland has set a world record when it comes to crypto adoption. The Swiss Banks were the first globally to collaborate with crypto firms by providing them with business accounts in 2018. The country classified cryptocurrencies as assets. Part of the country accepts Bitcoin as a legal tender for selling, buying, and paying for goods and services.

Crypto taxes in Switzerland takes different turns. The country considers buying and selling crypto from authorized traders as business income will tax the income. However, there will be no capital gains tax when you become an individual trader by holding or trading crypto as an investment.

Additionally, Switzerland is famous for its Crypto Valley in Zug City. The city operates as a crypto hub, attracting several crypto-related enterprises, blockchain startups, and exchanges. The crypto valley offers a tax-free crypto environment for investors.

·       The Netherlands

The Netherlands has an open arm on crypto assets, with a plan to enhance its economy using digital asset trends. The Dutch National Bank (DNB) is the crypto regulatory body in the Netherlands.

Crypto regulation in the country is quite friendly, which attracts many residents to engage in the use of digital assets. They use the standards set by the Financial Action Task Force (FATF). Notably, there’s no crypto gain tax in the Netherlands. But crypto is taxed as a unique asset.

·       Germany

Germany views crypto assets differently from most other countries in terms of taxation. The country does not like digital assets as a currency, stock, or commodity but as private money. Its flexibility in crypto taxation makes Germany one of the hottest places for crypto enthusiasts, investors, and traders.

In line with its laws, Germany takes no capital gains tax on Bitcoin and other crypto assets once held for over a year. Also, in terms of buying and selling, there’s no VAT on the crypto assets in Germany.

However, Germany takes tax on income from crypto mining and staking. Staked crypto tokens will become tax-free after ten years. Also, the country taxes crypto assets for less than one year but with over €600 gains.

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How Different Regulators Reacts To The Crypto Industry

The increasing risks and turbulence in the crypto space increase the need for regulation. In the first half of 2022, the algorithmic stablecoin Terra’s UST crashed with its ecosystem.

This event triggered a crypto contagion leading to the collapse of other crypto-related firms like Celsius Network, Voyager Digital, and others.

Further, the sudden shutdown of one of the global crypto exchanges, FTX, raised mixed reactions both within and outside the crypto industry. Many other firms and individuals exposed to FTX suffered massive losses worth billions of dollars.

Following the recent events in the crypto industry, some regulators are tightening their regulatory stance on the industry.

Here are some of these regulators.

The US Securities and Exchange Commission (SEC)

The United States Securities and Exchange Commission (SEC) oversees the regulation of traditional US securities like debt instruments, equities, and investment contracts. It has kept its regulatory oversight on crypto assets in recent years.

The SEC claims that investment contracts involving crypto assets are within its jurisdiction. So, it demands compliance with securities laws while transacting with such products.

Moreover, the regulator has been using enforcement action in cryptocurrency regulatory measures. Since 2020, the SEC has been in a legal battle with Ripple Labs and its executive over the sales of XRP tokens as securities.

READ ALSO: Montana has Made Mine Cryptocurrency Bill Legal

Commodity Futures Trading Commission (CFTC)

The CFTC is a US regulator that oversees commodity derivatives like futures and swaps. The regulator applies similar regulatory rules on traditional commodities like gold, copper, and other financial products to crypto derivatives transactions.

On its part, the CFTC has not been quite low in its regulatory operations. It exercised enforcement actions against some individuals it accused of violating its rules on crypto transactions. Also, it has aggressively slammed on some crypto exchanges such as Binance, Kraken, Gemini, Coinbase, BitMEX, and others.

Three bipartisan proposed bills in Congress are still pending for CFTC to become the major federal regulator in the crypto industry.

Financial Crimes Enforcement Network (FinCEN)

The Financial Crimes Enforcement Network (FinCEN) is another prominent regulator in the crypto space. The FinCEN oversees all cryptocurrency operations focusing on anti-money laundering (AML) and controlling terrorism financing.

The FinCEN provided guidance and publications regarding its activities within the crypto space. It was the first US regulator to provide definitions of several terms related to virtual assets.

Officer of the Comptroller of Currency (OCC)

The Officer of the Comptroller of Currency (OCC) regulates traditional banks that engage in the crypto ecosystem. They monitor the exposure and activities of the banks with crypto assets and ensure they maintain the set rule to avoid significant risks in their crypto operations.

READ ALSO: Anti-Money Laundering Crypto Regulations around the World

Why Many Regulators Remain Negative About Cryptocurrencies

Governments worldwide are contending with the challenges caused by cryptocurrencies, including consumer protection, environmental harm, and criminal activities. Some of the issues with crypto are as follows:

Illicit Activities

Recently, there has been increased activity of cybercriminals who carry out ransomware hits and infiltrate and close down computer networks. They will then demand payment to fix them, which often happens in the crypto industry.

According to the US DEA (Drug Enforcement Agency) current yearly assessment, money launderers, and drug cartels are also increasing their incorporation of virtual currency.

Even the European government has closed down some known darknet markets-websites. Such sites allow anonymous persons to utilize cryptocurrency to purchase and sell illegal goods and services, mainly drugs.

But according to critics, the efforts of the enforcement have fallen short. An example is the theft of more than $1 billion worth of crypto in 2022 by the notorious hacking group Lazarus Group in North Korea.

Sanctions Evasion and Terrorism

The role of dollars as the currency for primary reserve for the global economy empowers the US to impose economic sanctions.

That notwithstanding, states like Russia, North Korea, and Iran increasingly use crypto to evade the United States sanctions.

Similarly, groups like; al-Qaeda, the self-proclaimed Islamic State, and Hamas, the military faction of the Palestinian organization, are also trafficking cryptocurrency.

Environmental Pollution

Many people may not be aware that Bitcoin mining is a highly energy-consuming process. At present, the network consumes higher electricity than others.

As a result, there has been the fear that cryptocurrency is contributing negatively to the environment and causing a climatic change. The Crypto proponents say that renewable energy can alleviate the problem.

To be precise, the president of El Salvador has guaranteed to use volcanic energy to mine Bitcoin. Reportedly, Ethereum’s move to a proof-of-stake model that uses lower energy was also due to environmental concerns.

Volatility and Improper Regulation

The fast growth of DeFi and cryptocurrencies shows that billions of dollars of activities are occurring in a comparably unregulated sector.

Thus, concerns are raised about cybersecurity, tax evasion, fraud, and financial instability. If cryptocurrency became the major form of payment globally, it could restrict the capacity of the Central banks, especially for those in smaller nations. It may make them set their monetary policies by controlling their money supply.

The high levels of volatility in the sector reduced the value of numerous cryptocurrencies in 2022. As a result, few cryptocurrency companies couldn’t payback their lenders, who were majorly other cryptocurrency companies.

Various lenders and borrowers declared bankruptcy, such as; FTX, the world’s 3rd largest crypto exchange at the time. FTX collapse caused a loss amounting to billions of dollars to investors.

Bottom Line

Generally, is cryptocurrency the future of money? According to the “Imagine 2030” reports from Deutsche Bank, the present money system is quite vulnerable. The bank believes that by 2030, digital currency usage will escalate to more than 200 million users.

Following the recent collapse of the US Silicon Valley Bank and Signature Bank, people are losing confidence in traditional banks. They seek a secure alternative that will ensure the protection of their funds and access to withdraw without third-party interference. Also, they crave a hedging strategy that would prevent the impact of inflation on their money.

Digital currency may likely be the alternative with the potential to replace cash. It offers a better profitability opportunity to increase your funds through investments more than conventional assets.

With stablecoins, users could hedge funds from any impending inflation since they provide stability in the value of funds. Also, using crypto assets protects your identity since crypto transactions remain anonymous.

More decentralized methods of payment are increasing every day. Further, many countries are on the verge of releasing central bank digital currencies, CBDCs. This implies increased adoption of virtual currency.

However, the world may embrace the more regulated version of digital assets to avoid the risk of cryptocurrencies. But this could also change if countries create more regulations to govern the issuance, usage, investments, and operations of cryptos and related firms.

Crypto assets are unlike stocks and bonds and don’t derive value from any underlying entity. Instead, they are associated with high volatility with uncontrollable price swings. It’s advisable always to consider your risk tolerance before exposure to cryptocurrency.

Moreover, investors must conduct in-depth research before exposing their funds to crypto asset investments. The market is volatile, and prices can fluctuate without notice causing massive losses to careless investors.

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