How far are we away from mass adoption of currencies?
When will the masses take up cryptocurrencies with gusto? The idea that cryptoassets are a new bedrock for a digital global financial system is either
- entirely possible given the presence of a narcissistic billionaire in the White House
- inevitable, frankly, so adapt and move on
In late 2018 the nuanced answer to this question looks somewhat location-dependent. While much of the financial establishment view cryptos as a Ponzi scheme for millennials and the grossly gullible, many Venezuelans and Zimbabweans, exposed to terrifying hyperinflation and the risk of government plundering, consider them a safe haven.
Many Africans don’t have to put up with fiat currency squalls anymore thanks to cryptos. “Developing markets,” Gabriel Francisco, cryptocurrency expert at TMT Blockchain Fund told OpenLedger, “within second or third world countries, with high government debt levels and a sense of eroding currency value, are absolutely ripe for a peer-to-peer system.”
Central and South American countries are embracing cryptos while in Africa, he says, Kenya is a world leader in digital and mobile money; more than 75% of Kenyan adults using digital currency M-Pesa – barely any Kenyans bother with a physical bank.
Perfection can wait
Kevin Murcko, CEO of crypto exchange CoinMetro, agrees with Francisco. For nation states vulnerable to currency devaluation jolts and general economic rockiness, cryptos don’t have to be perfect. They just have to be better than the fiat alternative.
“This is why Bitcoin has taken off in places like Venezuela, Turkey, and Argentina,” says Murcko. “When people lose faith in national currencies and central banks, crypto is now becoming the natural asset to turn to.”
Two boffins, Dr Zeynep Gurguc and Prof William Knottenbelt, employed at Imperial College London, have asked the same question: how long till crypto mass adoption? Both consider crypto mainstream take-up will come within a decade.
The internet on your phone – coming soon
Let’s lean further into the question. Consider Apple’s iPhone. Introduced in 2007 (though it feels it has been around for ever) it, and its rivals, revolutionised how we do daily tasks. Many now pay and download an airline or cinema ticket via an Apple (or Android) device, for example.
Paying for something – almost anything – has changed. Not because technology is remarkable but because it’s effective (though airport passport tech remains way behind, despite biometric advances).
Mass adoption has never been about a function of scalability reminds Andre Cronje, chief blockchain officer at CryptoCurve. “It [mass adoption] was a function of usability but ICO’s needed something to keep the hype going. Why use something that takes 30 minutes to make a payment?”
By the same measure database mass adoption can’t be premised on scalability. “I don’t see everyday people using Postgres or MongoDB [free, open source databases],” he says. “Instead, we see them using solutions on top of it. Solutions that make their life easier. We need solutions that facilitate usability.”
PayPay, credit cards – and other financial parasites?
Erica Stanford says crypto technology will go mainstream within five years. “In the same way we use PayPal now,” the investor and co-founder of CryptoCurrencySimplified.com told OpenLedger, “with no concern for the underlying technological infrastructure, our future payments might be converted from fiat into a cryptocurrency token and back into fiat.”
So if anyone can send money for free, then the business case for PayPal and credit card players looks wretched at worst and undecided at best.
“There are already apps that simplify the crypto transaction process,” she adds. “Soon you won’t even realise you’re making a cryptocurrency transaction – it will be as straightforward as clicking a name or tapping your phone on a contactless reader.”
We’ve got your Bakkt
To get to that point regulation and acceptance of cryptocurrencies by global organisations must happen – and is: Starbucks has joined forces with Microsoft and others to create Bakkt, an open, regulated global ecosystem for digital assets such as Bitcoin.
While blockchain tech has teething problems, scalability hurdles are likely to be overcome (remember, this is open development tech).
But while entering the woods for denationalised privacy might be fine at weekends, it’s not so practical for the workday cut-and-thrust (yet). Like being a trusted part of the global bigger picture.
Central banks don’t just control money supply. They have to worry about interest rates, unemployment rates, productivity and a ton of macro-economic issues.
Yet if trust in fiat money continues to split off – regulatory indecision is everywhere – and faith in digital privacy continues to rise fast, what will the future look like and who will determine it?
Gabriel Francisco has an idea. He says a new generation of banks are poised to capture the imagination of millennials and anyone else fed up with the existing financial furniture.
Francisco believes tokenized hybrid banks will make banking more personal and decentralized, sooner not later. “Crypto will hit high street within the next two to three years as no one will want to be left behind,” he says.
At the time of writing (early October 2018) cryptocurrencies remain 50% down on the start of 2018. Many small investors who piled in late got badly burnt from 2018’s mid-winter blow-out. Some will be mulling not just losses but the tax consequences of speculative risk-taking (most governments regard cryptos as taxable assets).
Yet risk levels, suggests ex-banker Reinhard Fellmann, lecturer at the LSE and the CEO of Review.Network, are up across most asset classes and economies – a part-consequence of a modern, connected world.
A hard UK Brexit, for example, could hit the collective monetary system in a big way. “We experience many more Black Swan events than we used to, even 100 years ago,” he wrote in an email to OpenLedger. “This means a breakdown of a developed economy might mark the birth of the digital currency on the high street.”
High net worth is interested
Some investors now include crypto as part of a balanced portfolio. “Many high-net worth individuals are putting up to 1% of their wealth in some form of crypto,” Matt Novak, partner at All Blue Capital, told OpenLedger.
Novak says mass adoption will be “led by retailers or institutions accepting it as payment. We are still in a phase of education and acceptance”.
Coins will be integrated with AI, says Novak, to help the retailer from targeted promos to inventory management. “Fiat will ultimately become obsolete on the high street”.
Banks get cryptos
Grant Blaisdell is the co-founder of Coinfirm, a tech startup helping financial services firms work inside the crypto space, supported by anti-money laundering and anti-terrorism defences. Blaisdell told OpenLedger it is working with one of the world’s largest banks.
“The largest players in financial services are not only taking cryptos seriously but working to interact with them. Whether it be this particular bank or an entity such as TD Ameritrade or Nasdaq, the long term validity of cryptocurrencies in the wider economy is not a question of if, but which ones, when and to what scale?”