THE FUTURE OF CRYPTOCURRENCIES

Due to media attention of cryptocurrencies and the numerous stories of ‘Crypto Millionaires’, they are being closely watched by tax authorities, regulators and Governments, who are trying to understand the realm and reach of cryptocurrencies and how or where do they fit into the current regulations and legal frameworks on a global scale. Since these are de-centralised virtual currencies that don’t use the financial mainstream controlled by law makers, Governments and regulators, it is creating friction, simply because the issue is not going away and cryptocurrencies are becoming ever more popular.

One concern is the anonymous nature of cryptocurrencies, since funds are not stored or transacted in a traceable traditional manner, causing concerns of money laundering, terrorist financing, tax evasion and the coins being used for illegal activities for criminals. Cryptocurrencies are outlawed in some countries but the list is small and whilst there may be negative news relating to cryptocurrencies, it is certainly an area that attracts an overall positive sentiment for the future of money.

Since digital coins don’t fit in the current financial system, it would be fair to say that the future of cryptocurrencies and its technology will be dictated by policy makers at some point. There is no denying that many believe they have a key role but what that will look like no-one currently knows, yet they are getting the attention of bureaucrats’ right across the globe. The main worry is that blockchain technology and its associated cryptocurrencies will cause significant disruption to the traditional financial mechanisms because the current system and billions of dollars are on the line.

There are a number of countries that have already banned ICOs and crypto trading, some are even considering banning mining coins. The most notable country to have banned ICOs and trading is China. South Korea has also banned ICOs along with anonymous trading of cryptocurrencies. Some countries are embracing the opportunities such as Switzerland, Japan and Gibraltar, who have introduced a licensing regime for cryptocurrency exchanges.

One of the main reasons regulators are struggling, is that they don’t yet know how to define cryptocurrency, whilst, in the U.S they have been classed as commodities, and by doing so puts them under the review of the Commodity Futures Trading Commission, who don’t have much authority to oversee cryptocurrency exchanges, so in reality it’s a counterproductive move by the U.S.

Whilst it may be true that banks and governments are wary, cryptocurrency and peer to peer software is attractive to the general public because blockchain technology eliminates absolute power from the traditional powers and lower fee’s that customer generally pay for banking and financial services.

Peer to peer transactions do make sense in a modern world because it is inclusive rather than exclusive. There are many countries where transactions are not possible because the fee’s payable by citizens aren’t attractive to banks, financial services or credit providers, but with cryptocurrencies you can make small transactions at very low cost because coins can be split to equal smaller percentages of the coin, i.e. if one bitcoin is worth $10,000 then 0.01 bitcoin is worth $1 and these calculations are achievable using blockchain technology.

In summary Blockchain technology and cryptocurrencies aren’t going away, they are getting more and more popular and widespread but the next move will most certainly be made by bureaucrats’, so until we understand their motives, it would be difficult to predict the future of cryptocurrencies.