By now, cryptocurrency is widely understood and embraced by investors and somewhat familiar to the average person.  We will likely never look back from digital currency; in fact, few of us conduct day to day transactions in cash anymore. But how will the digital currency landscape change when and if the government imposes regulations? 

We’ve heard murmurs of illicit activity, primarily by the drug cartels, using Bitcoin to move money easily and avoid detection by the authorities, but the truth of the matter is that regulations will probably affect everyone’s pockets.

Potential Impact on Trade

The benefit for businesses to transact in digital currency is the speed at which a transaction can be completed. Today, a Swift transaction (ironically, which isn’t too fast) can take a week to clear a $10,000 transaction. Using digital currency, a business can purchase its inventory overseas in a matter of seconds.

Faster transactions will change the way small business inventory is managed by removing the middleman (the bank), saving businesses transaction fees and decreasing lead time by facilitating faster processing.

Digital payments take place without a bank or payment processor like PayPal in the middle. Payment is direct from the customer to the business. When customers pay with credit card, the business bears the cost of a fee to offer that convenience to customers. If customers pay with digital currency, that cost is removed, allowing the business to keep more of their profits. Over time, the savings can be quite substantial and be a significant factor for improving a business’ bottom line.

Waste-mindful businesses expend a lot of energy trimming the fat from their production processes to save money and operate more efficiently. Facilitating digital transactions to reduce fees would be a logical step to increasing ROI.

The Future of Digital Currency

Most digital currencies, like Bitcoin, are not backed by tangible assets thus the evolution of digital currency to a sustainable system will lead to blockchain based currencies back by physical assets like gold, silver, platinum, etc. 

Cross border payments could be facilitated by XRP, predicted to be the bridge between currencies, replacing the U.S. dollar. We are already seeing a decline in the dollar’s value and dominance as Russia, China and other countries began exchanging in alternative currencies. Once the lawsuit between Ripple and the SEC is settled, XRP is expected to increase in value, some anticipating similar behavior to Bitcoin when it first took off.

There are still too many people in the world who have never had a bank account to transition to a world without paper currency, but we should expect to see a gradual shift as people become educated about the ability to possess one’s own wallet without a bank and all the processes involved in opening a bank account.

What we have yet to see in the blockchain world is better security. Currency stored at online exchanges can be hacked. For digital currency to thrive, we will need a more reliable system, the quantum financial system, hopefully just around the corner.