Cryptos ‘Next Natural Step’ for Global Economy – Study
The eighth top university in the world according to QS current rankings has submitted that cryptocurrencies have the potential to become a mainstream form of payment within the next decade. In a new research released on Monday, the authors from the Imperial College London argue that cryptocurrencies are already equipped to fulfil one of the three fundamental roles of traditional fiat money: acting as a store of value.
Written by Professor William Knottenbelt from Imperial College London and Dr. Zeynep Gurguc from Imperial College Business School and released in partnership with eToro, the report – Cryptocurrencies: Overcoming Barriers to Trust and Adoption, concludes that the widespread use of crypto is a natural next step to reduce friction in the global economy.
Their report comes as the People’s Bank of China (PBoC) disclosed that the crackdown it instituted last year on crypto-related activities in China has been a success. The Bank claims that Bitcoin trading in the country using the Chinese currency, RMB, has gone down drastically to less than 1% of the world’s total from about 90%. It also confirmed it ensured a zero-risk exit for 88 virtual currency exchanges and 85 ICO trading platforms since September 2017, according to a report by Xinhua.
A downtrend in the Chinese market will be an additional challenge for cryptocurrencies to go mainstream alongside the shortcomings highlighted by the authors of the new report on factors that need be addressed for cryptocurrencies to represent a viable technological update to how money is spent today.
“New payment systems (or asset classes) do not emerge overnight but it is worth noting that the concept of money has evolved – even in our lifetime – from cash to digital or contactless payments,” says Dr. Gurguc. “The wider use of cryptocurrencies and crypto-assets is the next natural step if they successfully overcome the six challenges we set out in our report.”
The existing challenges that need to be overcome according to the authors are:
- scalability to facilitate high volumes of transactions at present
- usability through user-friendly design
- regulation with a standardised global approach
They say overcoming these challenges will enable Bitcoin to fulfill the remaining two roles of fiat money: medium of exchange for goods and services and unit of account to measure value in the economic system.
Professor Knottenbelt believes that decentralised technologies like Bitcoin have the potential to upend existing knowledge about the nature of financial systems and assets. Hence, he stands by their study’s submission – despite the scepticism that cryptocurrencies may emerge as a day-to-day payment system – that “cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment.”
The study also looked at how a foundational technology like Blockchain has the potential to reshape industries as well as disrupt traditional business models, organisational and governance structures.
While China may be going low on cryptocurrencies, its interest in Blockchain seems to be getting bigger. SUch is the case of a state-owned commercial bank and one of the world’s largest by total assets, the Industrial and Commercial Bank of China (ICBC), which just sought to patent a blockchain system for the exchange of financial assets which enables participating institutions to function as nodes to form a distributed network.