Economic Impacts/Poverty
The advancement in technology and digitization of the economy has led to the birth and growth of cryptocurrencies in the recent past. As the globe becomes more digitalized, there is a clamor for instant digital money for different transactions. Cryptocurrency is a virtual payment system or network that does not depend on the banks to verify transactions. In other words, it’s a peer-to-peer platform that allows anyone to send and receive funds anywhere in the world. One of the most prominent cryptocurrencies is Bitcoin (Dudukalov et al. 1). As it is popularly known, the king coin, Bitcoin was the first cryptocurrency to be developed globally. Bitcoin has been one of the most talked-about topics over the last couple of years as most people seek information about its operations (Dudukalov et al. 1). It also has been a topic among business and government regulators. The majority of investors are also venturing into cryptos intending to earn a coin. In this regard, it can be argued that Bitcoin is the future in a digitalized economy. This paper critically analyzes ‘The Cryptocurrency as Money of Digital Economy’ by Dudukalov et al. The essay agrees with the article under review that cryptocurrency, specifically Bitcoin, is here to stay and will have a major impact on the global economy. However, the paper cites volatility and unpredictable government intervention through policies and regulations as some impediments to Bitcoin’s growth and adoption as a future currency.
Dudukalov et al. analyzed the opinions of 350 experts from different sectors of the economy from Thailand and Russia on the prospects of cryptocurrency in the context of the digital economy trend (1). The authors provide different aspects of cryptocurrencies and how they operate and are generated. According to the article, the meteoric rise in value is a testament that Bitcoin has gained traction despite resistance from regulators and major financial institutions (Dudukalov et al. 1). The authors posit that Bitcoin has overcome the resistance to offer two main functions; payment or transactional and income generation for investors. “Bitcoin is increasingly being officially viewed as an alternative to traditional money” (Dudukalov et al. 2). The authors found that both the Russian and Thai business communities are optimistic about Bitcoin’s introduction into circulation.
Cryptocurrency has revolutionized business transactions in the world. Gone are the days when people and businesses had to wait for months and weeks before they could transact a business due to delays in the payment systems. Bitcoin and other cryptocurrencies provide instantaneous payment. Bitcoin is also a peer-to-peer payment network whereby no third parties are required. The majority of businesses and corporations are now using Bitcoin for payment or transactional purposes since they can evade the harsh restrictions by governments across the world (Dudukalov et al. 3). For instance, the regular bad blood between China, Russia, and the U.S. hampers business flourishing among companies and individuals in the three countries. The love-hate relationship between these nations has seen increased surveillance and restrictions on business transactions. However, businesses and individuals can circumvent these harsh and unnecessary restrictions by using Bitcoin and other crypto-related systems. Dudukalov et al. found that 66% and 78% of Russian and Thai business experts view Bitcoin as a secure and safe payment tool (7). “Most of the interviewed experts consider Bitcoin more as a tool for secure payments, 66% – in Russia, 78% – in Thailand” (Dudukalov et al. 7). The researchers also found that Bitcoin is set to become a leading means of payment in the future but might not replace traditional currencies. The findings confirm that Bitcoin is slowly gaining footage as one of the best and fastest payment methods. For a long, cross-border money transactions have experienced numerous challenges due to restrictions and bureaucracy in the banking sector. However, since Bitcoin does not need banks for transactions, cross-border payments have become easy and instant increasing international business.
Bitcoin also provides an investment route for many investors. According to Dudukalov et al., the value of Bitcoin in 2009 was less than $1; however, its value has risen over the years to more than $50,000 (1). In other words, in about 10 years, Bitcoin has increased its value by more than 50,000 percent. It is no doubt that there is no other asset that has risen in value more than Bitcoin over the last 10 years. The mushrooming of the crypto exchanges in the last couple of years provides the public a safe marketplace to buy and sell Bitcoin (Dudukalov et al 7). Today, there are many crypto exchanges in the world, and one does not have to visit them as most of the transactions physically are done online. The findings by the article also conform to the recent developments where most people invested in Bitcoin during the lockdowns as other commodities were on a free fall due to the closure of most economies in the world.
The researchers also found that the high volatility rates associated with Bitcoin and other cryptocurrencies might impede their adoption as global currencies. The interviewed experts expressed their dissatisfaction with Bitcoin as a means to accumulate wealth and be a global payment system. They cited high fluctuations and instability in the exchange rates as some of the aspects inhibiting Bitcoin’s growth. The article also found that the unpredictable legal systems governing Bitcoin infrastructure inhibit its success. They blamed the weak legal systems for high volatility and turnover by stating, “the weakness of the existing system of legal regulation of Bitcoin turnover” (Dudukalov et al. 7), which will inhibit its growth and adoption. These aspects may work against Bitcoin and other crypto-related technologies and systems. Dudukalov found that most experts are against state interference with the cryptocurrency industry (7). The researchers found that the government should only provide enabling environment and allow the industry to thrive.
Ultimately, it can be said that the government has been in denial that Bitcoin and other cryptocurrencies are here to stay, and the more it restricts them through draconian regulations, the more they gain value and traction. It is time for governments and regulators to accept that innovation cannot be restricted. Besides, the traditional financial systems restrict the flourishing of global business hence the growth and acceptance of Bitcoin. In this regard, the government should stop restricting the growth and development of Bitcoin but provide a friendly environment and protect the public from any con game involving digital currency.