Digital currencies are still having a tough time gaining their footing, but it seems blockchain technology is faring quite well. The International Monetary Fund recently released a report on cryptocurrency and in the report, there is an article called Back-to-Basics.
The article discusses what some experts believe are key terms and concepts that come up on a regular basis in the cryptocurrency industry so that readers have a better understanding.
Interestingly enough, experts in the report also seem to take the position that cryptocurrency is not exactly equal to traditional money. That is, it does not provide the same basic functions of being traditional money, such as storing value, being a means of exchange, and a unit of account.
The article also featured several issues associated with cryptocurrency which are preventing its mass adoption and it being equated to traditional funds. For instance, cryptocurrencies are too volatile, and as a result, they are useless as a store of value.
Cryptocurrencies also have limited acceptance – merchants have not mass adopted the payment method, there are tax issues, legal considerations, and it is difficult to make them into a medium of exchange.
Another factor is the cost of production – the mining process takes a lot of power and money. Also, there is not a lot of trust concerning transactions, which may cause users to shy away. Finally, cryptocurrencies can be used for money laundering purposes.
At the heart of it though, these are just the perceptions of the IMF. Further, even though the IMF highlighted several factors that may negatively impact cryptocurrencies, it also discussed a number of positive qualities. The article stated,
“Distributed ledger technology could reduce the cost of international transfers, including remittances, and foster financial inclusion.”