Bitcoin rocked the world with its release in 2009, and in the subsequent decade, the concept of cryptocurrency gained real traction in the market. Although it’s still very much on the periphery, this new format has slowly become a more widely accepted method of payment.
The process of acceptance does have a similar feeling to the fears over potential effects on the future spread betting, which never materialized. And this is exactly what we see happening now, as cryptocurrency starts to integrate into mainstream financial markets.
Always volatile, digital currencies received a blow when China opted to outlaw them in 2017. Many predicted the trend would swiftly come to an end, but there was more to the story than met the eye. The objection from China seemed to be less about the concept of a digital currency, and more about who had control as it worked hard to release the digital yuan.
China wasn’t the only country who had a digital form of money in its sights; here’s a closer look at developments.
Digital Currencies: an Oversight
For years, Bitcoin and its peers such as Ethereum have been known generically as cryptocurrency. They are a type of e-currency which shares similarities with digital currencies, without being exactly the same.
The critical difference is that cryptocurrencies are decentralized with regulation being provided by the community. In stark contrast, a digital version is centralized, making it no more than a digital version of money already in circulation.
This has been the major criticism of digital currencies. Rather than offering real innovation, they’re simply a move to making people use the existing money in digital form.
Where to Find Digital Currencies
Digital currencies are still very much in their infancy with few countries launching publicly so far. However, there are many in the pipeline, and there is a real global appetite for digital currencies to become a success.
Part of the reason for this is organic; there has been a shift away from paper and coin currency, so a more sophisticated electronic option seems inevitable.
The countries which have launched their own digital currency so far (or are about to) include China, Ecuador, Tunisia, Singapore and Senegal. Others who are following hot on their heels include Sweden, Russia, Japan and Estonia.
For some of these nations, the end goal is to replace fiat money completely, relying entirely on the new digital currency. For others, the digital format is only intended to supplement continued use of traditional cash.
So far, the US and the Eurozone have resisted the urge to join the throng but will be watching closely. As numbers swell, it’s expected there will be growing pressure for even more countries to join in with the digital revolution.
Not Without Risk
While digital cash is still in the very early stages, concerns have already been raised about what this could mean, especially in authoritarian countries. Relying entirely on digital money as China plans to do means that every transaction and purchase can be tracked, something that many feel apprehensive about.
It could also spell the end for Bitcoin and crypto, or at the very least halt its move into broader use. More central banks could follow the example of China and ban decentralized currency, forcing users to move to their digital cash and abandoning Bitcoin and co.
It’s too early to predict how events will unfold, but it’s clear that as a centralized currency, a digital currency does not offer the same benefits as cryptocurrency. Whether the two can exist in tandem remains to be seen.
Andrew is a writer that does most of his work on cryptocurrency-related topics. While he’s primarily interested in Bitcoin, he also follows major altcoins and the innovative ideas that new cryptocurrency and blockchain projects are bringing to the table.