The pandemic has considerably shifted the mindset on digital currencies. Initially, the question was whether digital currencies had the potential to succeed. Now, the questions being asked are how and when digital currencies will reach mainstream status.
According to Deutsche Bank Research, payments using cryptocurrencies will escalate. What could possibly hinder extensive use is the great amount of energy consumed. Also transaction speeds tend to be much lower for cryptocurrencies in comparison to card providers.
Both policymakers and central bankers will respond by expediting their research and launching pilots. It is believed that Central Bank Digital Currencies or CBDCs will replace private currencies and become mainstream.
Acceptance Rates On The Rise
A survey conducted on 3,700 people in the US, the UK, France, Germany, Italy, and Spain revealed that the currency they will use will be fully digital. More than one third of millennials think that cryptocurrencies will replace debit and credit cards, as well as cash.
Naturally, the adoption rates of cryptocurrency use will largely depend on generational opinion. When surveyed, older populations were more fearful towards the use of cryptocurrencies. The older generations reported that cryptocurrencies were responsible for creating financial bubbles, much like the dotcom bust. Furthermore, they are viewed as financial instruments of low-liquidity. It was also discovered that a third of survey participants were completely unfamiliar as to how cryptocurrencies work and 40 percent had a partial knowledge.
Big Tech Ushering In The Mainstream Use Of Cryptocurrencies
In early 2021, Facebook has plans in the works to launch its own digital currency, Libra 2.0. Rather than competing with governments on developing a “parallel means of payments”, Facebook has emphasized more on “cheapening payments.” In addition to its multi currency coin, it also offers single-currency stablecoins. Facebook has essentially created its own payment ecosystem, which includes a digital wallet named novi, and is expected to be launched in early 2021. With 2.7 billion users, Facebook can certainly go head to head with traditional online payment platforms.
Also advancing digital currencies into the mainstream is PayPal. The company announced it will add digital currency capability to its wallets. PayPal users will be able complete transactions for both goods and services by using digital currency in early 2021. With PayPal being one of the largest providers in the world, crypto adoption will prove to be a massive development in the right direction.
Visa is also getting in on the digital currency trend, as it has filed a patent for a “digital fiat currency.” It has also partnered with Circle to allow card issuers to integrate USDC payment abilities.
Mastercard has also struck a card deal with Wired, further expanding its cryptocurrency efforts. With Wired’s multi currency Mastercard debit card, users can buy, hold, exchange, and even sell as much as eighteen digital currencies and cryptocurrencies. It will also permit free international ATM withdrawals up to a certain amount. Mastercard has also started a CBDC testing platform that is fully customizable.
Some Hurdles Ahead
Although cryptocurrencies are the way of the future, there are some challenges that need to be addressed.
Government and regulators must first be convinced of its legitimacy. In order for that to happen, cryptocurrencies must reach price stability. They must also gain global reach within the payments market. In order for this to occur, there must be strategic alliances formed with mobile apps, card providers, and retailers. The aforementioned issues plus its excessive energy consumption are hurdles that need to be tackled more easily before cryptocurrencies can achieve mainstream use.