Could crypto replace cash?

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Phillip Nunn, CEO at the Blackmore Group discusses whether the future lies with cryptocurrency or cash…

At the start of this brave new world of cryptocurrency, Bitcoin was unquestionably King. Right up until the beginning of 2017, Bitcoin was responsible for most of the industry’s market capitalisation.

Then, over what seemed just a few weeks, Ripple, Ethereum and other cryptos began to catch Bitcoin. And while Bitcoin is still very much in the lead, the huge changes in the industry are likely to continue. Analysts are predicting even bigger changes ahead – and even that cryptocurrencies might completely replace cash.

Are there advantages to a future of crypto?

There are several potential outcomes should cryptocurrency supersede fiat currencies in the future. An important point is that cryptocurrencies can’t be as easily manipulated as fiat currency, due to the decentralised and unregulated status.

Cryptocurrencies could also support the idea of a universal basic income in a more effective way than fiat currencies. Some programmes have already experimented with the use of cryptocurrency as a way of distributing a universal basic income.

Another clear advantage would be the fact that cryptocurrencies could help get rid of many ‘middle men’ in the process of everyday transactions, which would cut costs for businesses and consumers alike.

What are the disadvantages?

While there are many advantages on paper, clearly there would be huge challenges to overcome. If cryptocurrencies do outpace cash then traditional currency will lose value, with no way of recouping.

And, should crypto one day take over entirely then whole new infrastructures would need to be developed to ease the world into this new way of doing business. Difficulties would arise during the transition. For example, cash could become incompatible with new systems very quickly, meaning people will lose assets.

Established financial institutions would struggle hugely to adapt quickly enough, and many people would lose out.

Threat to governments

Aside from the impact on consumers and the financial sector, governments would also have major issues. The ability for the government to have control over central currencies is key to regulation. Cryptocurrencies would operate outside of this control.

This would mean, for example, that governments would no longer be able to decide how much of a currency to print in response to external – or internal – pressures. The generation of new tokens or coins would instead be in the hands of independent mining operations.

Difficult to predict

How much can we tell about the future of cryptocurrency? Some experts speculate that the industry is merely a bubble that will disappear. There is certainly a lot of speculation that cryptocurrency and its potential impact is being overblown.

For those of us who can see the strength of crypto, these are exciting times. Even for enthusiastic investors, it’s difficult to see exactly what will happen in the future. Changes happen fast and predictions are tough. One thing’s for sure – it’s a fascinating ride!

Phillip Nunn is CEO of The Blackmore Group investment house based in Manchester and London. 

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