Cryptocurrency’s Impact on the Economy Today

Cryptocurrency’s Impact on the Economy Today

As 2022 is truly underway, the debate on cryptocurrencies continues to heat up, with some calling for more regulation and some opposing it. There are many aspects to consider when debating what is the future of the crypto market.

There are some reported cases of countries moving forward with legalizing cryptocurrencies, with Russia testing the field earlier this year with plans to regulate crypto operations in the country. 

Some governments just see that the non-state-based cryptocurrencies pose a threat to the well being of citizens. This is done with a loss of investment due to the market’s volatility, as well as scams and cyber attacks.

More and more jurisdictions in the world have flirted with the idea of decentralized digital currencies, and how they pose a good alternative to sovereign ones. Of course, many countries are still opposed to this idea, but bans or regulations will surely determine the future of the industry itself.

Ban or Legalize the Crypto Market?

China is a well-known example of a country that has forbidden crypto trading. Last year’s ban on crypto mining was considered to be a massive loss to the entire industry, as the vast majority of that activity occurred in China.

Mining is basically running software on computer servers to try and solve cryptographic algorithms. This is a process that will validate transactions and it will produce a shared record of them across the blockchain network. Anyone doing this gets rewards in the form of a cryptocurrency.

Mining is an activity that occurs worldwide, and the mining ban in China made miners sell or move their equipment overseas. By doing so, they invested capital in jurisdictions that are more crypto-friendly than China, like the US.

As a result of that, the whole network strengthened, as mining operations were now diversified. So, this would prove that any future bans on cryptocurrencies and crypto mining can have much less of an effect on the market.

Most of the Bitcoin mining at the moment is done in the US, Kazakhstan, Canada, Russia, Malaysia and China. However, there are some additional problems that crypto miners face with the network. As an example, in Kazakhstan, power is being rationed away from crypto miners, as the government tries to conserve energy. This means that miners are leaving Kazakhstan as well, and doing all the work in other countries.

Some reports say that this energy-saving in Kazakhstan will cost the country’s economy around $1.5 billion over the next five years, as well as $300 million in tax revenue, which is just stunning.

Cryptocurrencies are not Totally Anonymous

The entire crypto world has come a long way since Bitcoin made an anonymous launch back in 2009. Nowadays, there are tons of cryptocurrencies in the market, and the total market cap is estimated to be  $1.6 trillion.

It is often said that the anonymity of cryptocurrencies is what enables illegal activity, such as money laundering, financing of terrorism, as well as drug trade. We are here to state that this is not entirely true.

Transaction history on public blockchains (let’s take Bitcoin and Ethereum as examples, as they are the largest by market capitalization) is totally public.

Plenty of governments, including Australia’s and the US ones, cooperate with some large private blockchain analytics firms to monitor and examine crypto wallet addresses and transactions of any citizen trading with them. This is effective mechanism governments have in place to mitigate risks of money laundering and tax evasion.

So, opposed to what many people believe, the vast majority of cryptos are not anonymous, it can be said that they are pseudonymous. If someone’s identity is connected to their wallet address with a central touchpoint, like a crypto exchange or an email address, that wallet can be easily traced back to the individual in question

Recent research by Zcash and the Rand Corporation showed that there is not a wide use of so-called “privacy coins” that are known to keep the users’ anonymity.

The Future Depends on Policies

Cryptocurrencies are becoming increasingly mainstream as an investment asset class, as well as a social experiment in non-state infrastructure. Thanks to all this, crypto communities have a very big influence on any public policy debate.

As an example, people who advocate cryptocurrencies were able to slow down a big federal infrastructure bill from passing in the US last year, so the power these people have is becoming bigger with each passing day.

Even though that seems to be the case, different jurisdictions choose different pathways when it comes to crypto regulation and policy courses. Some countries like China and Russia view cryptocurrencies are being fiscal and a challenge to sovereign money. 

However, there are plenty of countries in the world that view cryptocurrencies as a big opportunity to be a step ahead in terms of innovation, investment, as well as economic growth. It seems like cryptocurrencies will be a major talking point in the near to long term future, but just how the governments in the world will see it remains a totally different question.

Different approaches have emerged in 2022, but some may argue that this year may be the defining one for cryptocurrencies. It can be defining for both sides of the crypto market – those who oppose it and call for it to be banned, or those who welcome it with open arms.

Some examples in the past may suggest that countries that welcome cryptocurrencies and a more regulated form of a crypto network have big economic benefits. This is done with innovation, investment, different job opportunities, as well as taxes.

Of course, there are some business benefits of adopting cryptocurrencies as a digital asset. These advantages include access to new demographics, as well as being a step ahead in technological efficiencies in treasury management, so it seems like a win-win situation for all parties involved.

At the same time, as explained above, the effects of policy and crypto regulation show just how cryptocurrencies are not completely decentralized things. it is not something that just exists on the blockchain and cannot be traced. Governments have shown that they can combat illegal activities through different mechanisms.

There are plenty of incentives for entrepreneurs all around the world when it comes to cryptocurrencies. It is very easy for them to reach international markets rather than just staying and focusing on the limitations that are in place with their own national markets.

Sellers are now able to create relationships and mitigate trust with new markets. This is an aspect that was never available before, and it can be fantastic for developing nations and their economies. Every day in the crypto market, there is an average of more than 300,000 confirmed Bitcoin transactions in the world, which is a jaw-dropping number.

Even though it was announced in 2009, cryptocurrencies are considered to be relatively new, and some minor disadvantages have been a major obstacle in them making the next big thing. Protecting buyers has been mentioned as a big negative aspect, but governments have the power to implement better security mechanisms in place.

Sites are against the idea of using third parties to complete transactions, and this may lead to some buyers and users being left scammed. Over time, these aspects have improved drastically inside the cryptocurrencies, but there is still room for improvement. Maybe policies in different countries will be the next step, so much depends on that.

All in all, cryptocurrencies have paved a new technology-based road for anyone to go about business. The market has seen a large increase in the number of buyers, and it has allowed international trade to occur more smoothly. 

The market is inevitably growing each year, and with new policies in place, it can have a significant impact on the entire economical world. Maybe 2022 is the year when we will see cryptocurrencies make the next step and be an even bigger force in the global economy.