The Cryptocurrency Fuss – How Will it Change the Global Economy?

Back in June this year, I wrote an article about how several economies in Africa are developing the cryptocurrency, and how policymakers in larger markets have taken measures to support financial institutions’ digital transformation.

The article highlighted how Kenya has a great potential for cryptocurrency but is hindered by a heavy-handed regulatory response and slow compliance – something that is hindering digital economy growth.

Well, the country’s adamance in implementing policies for regulation isn’t far-fetched from the skepticism some pessimistic individuals harbor.

There is no denying that cryptocurrency is an attractive digital currency attractive to some consumers, particularly as a mechanism for managing currency devaluation and avoiding high transaction costs.

It is an essential building block of the digital economy; its growing adoption and use by consumers and corporates across the globe points to the direction of change.

Nevertheless, there have been concerns about how it will impact the global economy. Others think it will affect the economy negatively, while the proponents hold that it will steer it in the right direction.

Who would have thought, over two decades ago, that the internet would become such a thing we can’t do without? If someone told you years ago that you’d become so increasingly dependent on your smartphone to shop, stay updated, meet people, and conduct business, would you have believed it?

Well, it is the same for cryptocurrency. It can disrupt our lives the same way. Blockchain technology, to which cryptocurrency is hinged upon, is still evolving. And although we are not sure where it is headed, one thing remains true, the financial system will not be the same again – not in the wake of rapid digital transformation.

Those who argue that cryptocurrency will negatively impact the global economy, particularly the developing ones, are of the opinion that it removes the need for intermediaries like banks.

The newness and lack of trust among a large part of users are what they claim will bring about the negative change. Others also maintain that the high volatility crypto coins appear too regularly and the lack of regulating authority.

Nonetheless, cryptocurrency has supported financial inclusion in poor countries at an unmatched rate because of increased transparency during transactions. This is due to its decentralized ledger system, low cost of the transaction, and its ability to beat inflation if someone decides to hold it as a store of value.

Meanwhile, countries like El Salvador have seen the potential of cryptocurrency and that is the reason why it became the first nation across the globe to adopt Bitcoin as a legal tender in September 2021.

Also, many other countries are either developing or thinking of developing their own cryptocurrency, called the Central bank Digital Currency (CBDC).

Small businesses and large corporates are likely to adopt this digital currency, largely because it reduces regulatory oversight and helps them do business. Most users find it easy to transact and trade. But the real issue may arise with the transition.

As someone once wrote, how quickly – or slowly – we are able to move to adapt to this new technology-driven way of trading, and how smoothly we make the transition will decide whether cryptocurrency could benefit the global economy or crash it. But it will surely change the existing system.