Impact of Crypto Currency in Global Economy

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Impact of Crypto Currency in Global Economy

Internet is buzzing with the talk about cryptocurrency and blockchain technology. It is among the hottest trends of the modern era. Now is not possible to pass any day without getting news of any kind on cryptocurrency, from news channels, blogs, government legislation or social media. Many economical experts are still consider it a bubble, while others believe that blockchain technology has the potential to make ripples in the pool of global economy.

The core technology behind the cryptocurrency is described as a key disruptor of the global business process. However, cryptocurrencies are getting more attention than blockchain technology. Many entrepreneurs have used this technology to sell tokens to public, create ICO campaigns to make millions of dollar. A lot had happen in the world of cryptocurrency in a decade, ever since Satoshi Nakamoto had introduced Bitcoin. In this article we will discuss btc-loophole and the impact that cryptocurrency is having on global economy.

 

Disrupting the Dollar Standard

For the beginners, the global economy mostly rely on the US Dollar. This is the evidence of the influence of the US in political and economic affairs. The reserve currency of the global economy is US Dollar. Each mainstream financial actor in the world, function in the US market. That is why any disruption in the US financial market makes huge ripples around the world.

The global economy is interconnected, that we have never seen in the past. It is like an internet but limited to financial transactions and the hub of this huge web is US Dollar. The US Treasury is commonly considered to be the de facto global Central Bank. The dominance of US in the economic world is due to the Dollar standard. With the launch of cryptocurrency the dominance of Dollar is massively disrupted.

With the arrival of Bitcoin and cryptocurrencies, a massive decentralization is registered in financial transactions. These decentralizations are massively disrupting the supremacy of US Dollar and changing the dynamics of diplomacy, international trade, foreign relations and impact on economic sanctions. There have been many attempts in the past to free the global economy from the clutches of US dollar and cryptocurrency seems to have potential in achieving that goal.

Many countries including Venezuela and Russia are considering creating state owned cryptocurrency. The president of Venezuela had announced last year about the launch of an Oil backed cryptocurrency to help remove the crippling inflation forced on them by US lead economic sanctions. Cryptocurrency can be an escape route for the countries suffering from economic sanctions and make their way back into the global trade, which can be a huge attack on the dollar. North Korea had already tried to use cryptocurrency to move past economic sanctions.

Bitcoin Effect on Banks and Industries

The potential impact of cryptocurrency on central banks should not be underestimated. The Bank for International Settlement which is cooperatively owned by world’s top central banks had shared its concern in last November that cryptocurrency has the ability to interrupt the exert control over the economy and their ability to issue money.

So, most of the central banks are keeping tabs on the growth and development of Cryptocurrency. Many central banks had already send proposal for the development of a digital version of their own currencies. The first to explore such opportunities are the central bank od Canada and Ecuador.

Removing the Middleman

The mainstream financial environment’ ecosystem and international transactions require organizations like banks, clearing houses and SWIFT. The meaning of SWIFT is Society for Worldwide Interbank Financial Telecommunication, which is a company that supplies a network for financial organizations all over the world to convey information to each other safely. You can describe it as a personal WhatsApp for financial institutions and banks.

Not a single international transaction can be made outside of the SWIFT network. It takes several days to complete a transaction and there is also a transaction fee.

With the development of Bitcoin, Dash, Litecoin and many other cryptocurrencies, the transfer protocol suddenly changed and the middleman is no longer required to make international transactions. Not only this method is fast but also required very minimal fee to complete the transaction and the added value of privacy and anonymity is the trademark of cryptocurrency.

Cryptocurrencies are making massive disruption in global payment system by cutting out the middleman. The reason centralized payment processing protocol was  developed to stop the money laundering, funding for terrorist activities and illegal trade in drugs and ammunition. But with cryptocurrency it became harder to trace the transactions and find the identity of the participants.

Simplifying the Crowdfunding

You can’t fully comprehend the impact of blockchain technology without mentioning the role of Initial Coin Offerings (IOCs). Since 2017, ICO has become the leading method for crowdfunding for technology based startups. This idea had leaded many tech based startups to grow that would never have seen the light of day. The IOCs has become so popular in crowdfunding that they had become the main focus of many government agencies.

US had issued some rules regarding ICOs and China had completely banned ICOs in 2017. Many nations are already placing tighter restrictions on ICO. These sanctions and restrictions are the proof that cryptocurrency is making huge disruptions in the global market.

Bitcoin’s Impact on Political

Cryptocurrencies had bring quite some uproar in political arena. The main reason of this uproar is because no government had succeeded in controlling Bitcoin or any other cryptocurrency. This form of wealth is explicitly for its owner and no government can change that because of the technology these currencies are built on. Now, people are realizing the fact that cryptocurrency is a better form of untouchable money because they are based on technology that gives the freedom and security over economic rules.

The effect of virtual currency on society is very limited, despite the fact that it is a decade year old, it had barely reached the surface of main society. Many people are still unaware of its existence but in some modern countries, many vendors are accepting Bitcoin for payments.

Cryptocurrency Effect on the Future

Almost every international and digital transaction is using one of the form of digital currency. Bitcoin and other cryptocurrencies are designed same convenience and security with less processing time and fee. The biggest benefactors of this technology can be workers who are working abroad and had to use several intermediaries like currency exchangers, banks or wire services to send money home.

A recent study shows that an average remittance service fee is around 9% of the total money transferred and it may cost you 5% extra with the conversion of cash. Western Union is charging almost 16% on each transaction and this is due to the technology they are using to move money from one place to another. On the other hand Bitcoin can provide these services to you for free.

Conclusion

All the crypto currencies like Bitcoin, Ripple, Litecoin and Ethereum are growing in price and volume every day. They are also gaining in market capitalization and mainstream adoption. They are providing new ways to move money and do things that are changing everything. Crypto’s effect on global economy is already proven and only the time will tell about the revolution and growth of this technology.

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