Introduction
Cryptocurrencies are gaining more importance in the present era. The prices of cryptocurrencies are on a steady rise and show no sign of depreciation shortly. Apart from this, cryptocurrency mining farms are popping up globally. All this says one thing: cryptocurrency may be the future.
Every aspect of cryptocurrency is becoming popular among the masses, especially Defi systems, non-fungible tokens, Digital assets, and much more. People are looking forward to investing in more cryptocurrency opportunities to get a better return. This particular sector has attracted a lot of investment from big names like Elon Musk and Jack Dorsey.
With all this happening around, people have started asking questions like, “ Is cryptocurrency the future?”. Will cryptocurrency substitute money?Despite being a debatable topic, we will try to answer these questions by analyzing three signs that may predict the future of cryptocurrency.
How can cryptocurrency be the future?
Cryptocurrencies are moving further into the mainstream by huge investments pouring in, being accepted in various streams, and gaining humongous popularity in no time.A notable change in the crypto sector is undeniable as per the top trends in cryptocurrency predicted by the specialist.
Major institutions may adopt cryptocurrency like Bitcoin as a mode of payment. Some even consider that cryptocurrencies can also be an alternative to conventional fiat currencies and the future of money. To understand this particular aspect, you should know the basics of money.
Money is as money does- F.A Walker
This single quote answers the most crucial question: is cryptocurrency the future of money?As per this quote, money is anything that conducts the functions of being a medium of exchange, measuring a particular value, and storing a unit of account.
Since most cryptocurrencies are very close to satisfying these criteria, there are high chances that it may come true. But cryptocurrencies are highly volatile, and this volatility is a big drawback. This aspect keeps people split when it comes to investing and adapting them.Here are three signs that show a cryptocurrency will have a notable impact in the future and provide growth
Central Bank digital currencies
The central bank digital currencies are gaining more interest across the globe. With increasing importance to cryptocurrencies, the central banks have also decided to launch a virtual aspect of fiat currency. It is a sign that cryptocurrency will have an impact on the future. The CBDC is an electronic record of the country’s official currency that is issued and regulated by the authorities of the Central Bank.
The credit of the issuing supports the CBDC’s issued by the government. They can effectively reduce the implementation of monetary and fiscal policy.How does this work? CBCD’s will replace the existing fiat currency. You can buy and sell using digital currencies but cannot exchange them for the physical money of a region. It can improve greater security and provide reserve back the circulation of the traditional banking system. The digital currencies will function as a unit of account.
One of the major plus points of introducing the Central Bank digital currency is it helps to bring out unaccounted money into the financial system. Due to this, there is a high chance of centralization in this form of currency. On the other hand, people also feel that this may interrupt their privacy.
The CBDCS are in different stages of development throughout the world. The latest one is the Bank of Jamaica’s CBDC pilot which started the prototype testing around March 2021 and completed it on 31 December 2021.The Bank is targeting to roll out its currency in the first quarter of 2022.
Next in the pipeline is Mexico. It plans to introduce a new National CBDC in 2024. The news was about the formal treat from the Mexican presidency.Also, China has planned to interlink Digital Yuan with different forms of mobile payment apps. It has drastically dominated the retail transaction of the whole country.
CBDC’s are similar to cryptocurrencies but are a much more formal and regulated system introduced by governments globally. There is a high chance of cryptocurrency going public and dominating as a mainstream currency.
Stablecoins introduced in the system
Volatility is a double-edged sword when it comes to cryptocurrency. This one factor scares away investors and attracts them at the same time as some of the investors believe that it can make you a millionaire overnight, and in fact, it has made some ready-made millionaires.
Stablecoins are a form of cryptocurrency without volatility. It provides the required stability. Most investors with a lower risk appetite prefer to invest in stable coins rather than highly volatile crypto coins. The mining process involves an open distributed network.
Due to its non-volatile nature, the market for a stable coin has drastically grown in the past year. Tether USDT one of the popular decentralized stable coins in the US has grown from a market cap of 200 million dollars to 9 billion in 12 months. This tremendous growth has attracted a large number of investors.
With Tether USDT having an asset value equal to US dollars on a 1: 1 ratio, the government started to view stablecoins as a primary entry point into the decentralization of the finance system. The government is also focusing on implementing regulations in the stablecoin sector.
The US government is more accepting of stable coins and cryptocurrency. This sector is to be highly regulated. The president’s working group on financial markets like the SEC, CFTC, the treasury department, and the federal reserve are in a combined discussion to regulate the stablecoins.
Different parts of the world like India, the US, and Brazil have divergent approaches. Some countries are not accepting of the idea of decentralization or stablecoins. Regulations in stable coins are happening globally. It is a clear sign that cryptocurrencies will not just be present but also dominate the future of finance.
Taxation of cryptocurrency
Tax implication on cryptocurrency is an important aspect. Moreover, cryptocurrencies are treated as property and taxed as per the games. Every time a person sells crypto or NFT, the trade becomes taxable. Even if the user trades one cryptocurrency for another, it is taxable since it is seen as a property exchange.
Also, the short-term and long-term capital gains concerning cryptocurrencies are taxable. If you purchase and hold the cryptocurrency asset for more than a year, the gain is taxable under the long-term capital gain rate. It is much lesser when compared to the usual income tax rate.
If you sell the assets in a year, the gains are taxable as short-term capital gains. It will be equal to the investor’s ordinary income tax rate. The implication of the FATF travel rule will supervise every wallet owner on a public change. It will trace all the unpaid taxes.Taxation in cryptocurrency is a big sign that shows cryptocurrency is the future.
Which cryptocurrency is the future?
Cryptocurrencies like Bitcoin continue to top the present market and extend their future dominance. Other cryptocurrencies like bitcoins ripple a major attraction among the masses. These Bitcoins are growing at a much faster rate than expected.
Most of the crypto into the US and market specialists analyze that Bitcoin and there will continue to dominate the charts.To know more, take a look at Top 7 cryptocurrencies that expects to dominate the future.
Why cant cryptocurrency go mainstream?
This question is a debate trigger, there is a big difference between the two sets of people. One set believes that cryptocurrency will be the future of money. The other set contradicts this thought, they say that cryptocurrency may not be the future of money, and they have their reasons.
